You’ve probably heard of Gerber, the company that is well known for making baby food. Forty years after the company started, it introduced a line of life insurance products. This Gerber Life Insurance Review will give you a summary of what those products have to offer.
Table of Contents:
What is Whole Life Insurance
The first thing to understand is that Gerber Life Insurance is whole life insurance. Whole life insurance is made up of two parts; the death benefit and the cash value.
The death benefit is the actual life insurance part – this is the part that pays out if the insured passes away. The cash value is the “savings” portion of the policy. Each time you make a payment to the life insurance part goes towards the death benefit and part goes to the cash value.
If you decide to look into Whole Life Insurance it’s important to fully understand how the cash value works. Be clear on things like ways you can access the cash value, what the rate of growth is on the cash value, and what happens when you die. Some Whole Life Insurance policies only pay out the death benefit and the insurance company keeps all of the money built up in the cash value – others will pay out both.
The alternative to bundling life insurance with savings is to buy a term life insurance policy, which is going to be much cheaper, and saving or investing the difference in cost yourself. You’ll have more transparency in what you are actually buying and will likely get better returns with lower fees.
Gerber Life Insurance Policy Options
Gerber has three life insurance policies geared toward families with children:
- The Gerber Life Grow-Up Plan
- Gerber Life Young Adult Plan
- Gerber Life College Plan
Gerber Life Grow-Up Plan
The Gerber Life Grow-Up plan is a whole life insurance policy that earns cash value. Also, the death benefit automatically doubles when the child turns 18. There’s no extra monthly premium cost for this “doubling” benefit as long as premiums are paid in a timely manner.
The cost of this policy depends on how much coverage you get and the state you live in. Premiums start for as low as $3.27 a month for $5,000 in coverage. This premium rate includes the discount given when you sign up for auto-withdrawal of premium payments.
The cash value that for this, and many other whole life insurance policies, the payout isn’t mentioned on the site but typically is minimal compared to what you could accrue with traditional investment vehicles such as mutual funds.
For example, in a class-action lawsuit it is claimed that one policyholder was paying $7.22 per month for a $10,000 policy. After four years of premiums, the cash value was $27. After 18 years the cash value was $705.60. You can see that here.
Gerber Life Young Adult Plan
Gerber Life’s Young Adult Plan is a whole life insurance policy designed for kids age 15 through 17. The rate for the policy stays the same for as long as you and your teen own the policy. Healthy teens can get between $5,000 and $50,000 of insurance coverage.
As with the Grow Up plan, this plan will automatically double its payout amount once the child turns 18. The parent (or grandparent) is the owner of the policy until the child turns 21 years of age. At that point, the child takes over as the policy owner.
Gerber Life College Plan
This Gerber Life insurance plan is different from the Grow Up plan and the Young Adult plan. While those two products are whole life policies that earn a small cash value, the Gerber Life College Plan is an endowment policy.
Endowment policies pay out a pre-specified lump sum of money when the agreed-upon term is up or the policy owner dies, whichever comes first. Coverage options range from $10,000 to $150,000.
So, the Gerber Life College Plan is an insurance policy that covers parents until the specified payout date. At that point, the lump sum payout can be used for college or other expenses.
The goal is to have the lump sum payout occur when the child graduates from high school. Gerber compares this product to a 529 plan. However, unlike a 529 college savings plan, this money can be used for any purpose.
Also unlike a 529 plan, the payout amount is considered taxable income. This plan is touted as a way to give parents life insurance coverage while helping children pay for college or other expenses.
Now that you’re familiar with the types of plans Gerber offers, let’s talk a little bit more about term life insurance vs. whole life insurance.
Term Life Insurance or Whole Life Insurance?
Two of the life insurance plans Gerber offers are whole life policies; one is akin to a term life policy. So, what is a whole life insurance policy and how does it differ from term life insurance?
Well, the name kind of gives it away. The owner of a whole life insurance policy pays premiums on that policy every month until they die.
Conversely, the owner of a term life insurance policy pays premiums on that policy until the term is up. If they haven’t had the need to collect on the policy (i.e. die) during the term, premiums end and the policy owner simply walks away.
With whole life insurance policies, there is no “end of term”. The policy remains in place – and is paid for – until the policy owner passes away. Whole life policies typically have higher premiums as well, to make up for the cash value and long term associated with the policy.
While insurance companies love to tout the benefits of whole life insurance policies due to the cash value, the truth is that the cash value earned by the policy is typically much lower than you would get with traditional investment options.
For that reason, I recommend going with the more affordable term life insurance policy and accumulating wealth via traditional investing to give your family added financial security.
Here are our top recommended life insurance companies.
Gerber Life Insurance Pros and Cons
As with any company, Gerber Life insurance policies have their pros and cons. Here are some of the pros and cons I see with this brand of life insurance.
- No medical exam required
- Rate stays the same for the life of the policy
- Policy can be continued after the child reaches 18
- Whole life insurance is probably not a good use of money
- Cash value minimal compared to other investment options
- Life insurance for children is probably not necessary
Here are some other options for term life insurance.
Term Life Insurance Options
I prefer term life insurance over whole life insurance. After all, the purpose of life insurance is to cover your family in the event of an untimely event.
A smart financial goal while you carry a term life insurance policy would be to save, invest, and pay off debt, working to become “self-insured”. When someone is self-insured, they’re in a solid enough financial situation that they don’t need payouts from life insurance companies.
In other words, their debt is low enough – and their savings high enough – that their family will be financially secure if something should happen to them.
But you’ll likely want to consider term life insurance in the interim until you become self-insured. Here are two companies with high A.M. Best ratings that you might want to check out.
Bestow Life Insurance
Bestow Life Insurance company operates completely online. You don’t even have to have someone come to your home for a medical exam.
Instead, Bestow uses online insurance sources to get medical data and has you answer some personal questions as well.
Bestow is the online platform for North American Life Insurance. North American has been in business for over 100 years. They have A+ ratings with both Fitch and A.M. Best, two of the most trusted insurance rating companies in the world.
Bestow offers term life insurance policies for up to one million dollars with terms of 10 or 20 years. The minimum policy amount is $50,000.
Bestow also has another product; a two-year term life insurance policy that might be good for someone who, for example, needs life insurance in between jobs.
Since the policy application is completed online and verified through third-party sources, approval can happen quite quickly.
Also, Bestow offers some of the lowest insurance premiums in the industry.
Check out our full review of Bestow here.
Get a free estimate from Bestow
Fabric Life Insurance is another online life insurance company. Their policies are issued through Vantis Life; a subsidiary of Penn Mutual. Vantis has an A.M. Best rating of A+ (Superior).
Fabric says their policies are designed for busy parents. The company offers term life insurance policies for between $100,000 and five million dollars. They offer coverage term choices of 10-year, 15-year, and 20-year.
Like Bestow, Fabric’s online application process is easy and fast. The Fabric website says it takes just ten minutes. An added bonus of Fabric is that they will also help you create a will for free.
Get a free estimate from Fabric
For most individuals and families, term life insurance is the better choice. It’s cheaper and gives you more control over your savings. However, if you feel as if the company’s life insurance choices might be good for your family, feel free to check out the Gerber Life Insurance website to learn more.