The policy builds cash value - which the parent can borrow against until the child becomes the policy owner at age 21, albeit with policy-loan interest accruing “daily at the rate of 8% per year,” according to policy details - that after 25 years is guaranteed to be equal to or greater than 100% of the premiums paid. So long as the premiums are paid, the policy can’t be cancelled, which is part of the attraction for parents worried about the kinds of “conditions” their child might get that could someday make it impossible to get insurance coverage. The coverage amount doubles automatically when the child hits age 18, effectively cutting the premium per $1,000 in protection in half. The policy stays in place for as long as the premiums are paid, including into adulthood. The $50,000 policy costs between $28 and $45 per month, depending on the child’s age when protection is purchased. The premiums are kid-size, running anywhere from under three bucks per month for the smallest amount of protection on a newborn up to about $4.75 per month for the same coverage on a 14-year-old. Parents can get a whole life insurance policy on a healthy child - ages 14 days through 12 years - with a value of anywhere from $5,000 to $50,000. The company gets those application because the sales pitch tugs on the emotional heart strings of parents and grandparents, and because of the power of the Gerber baby, an internationally recognizable advertising icon that has embodied safety, purity and goodness since it first appeared on the company’s baby-food products in 1928. continues to claim that it has received more than 500,000 Grow-Up applications “in the last year alone.” The numbers haven’t changed in the sales pitches for year Gerber Life Insurance Co. In this case, “of the week” could apply to any time, as the Gerber Grow-Up Plan was started in 1967 and has been hugely popular since.
Technically, in most cases, insurance is not considered an “investment,” but that’s a legal distinction that should not distract anyone from seeing protection for what it is, namely the outlay of capital with an expected return in the form of coverage. Stupid Investment of the Week is an educational exercise that points out the concerns and characteristics that make an investment less than ideal for the average consumer.
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