Life Insurance for Babies? Worthwhile?

It has been 4 1/2 years since this posting, so we have updated our analysis as of January 2013.

So I'm sitting here in my family room with my young boys, TV blaring in the background.  A commercial for Gerber Life Insurance, the "Grow-Up" plan, appears on the screen.  What the?  Why would I want to spend money on life insurance for a baby??  Does this make any sense to consider?

The plan is summarized at  It is a whole life policy with coverage ranging from $5K to $35K.  You can buy the policy for a kid (or grandkid) anytime between the age of 14 days and 12 years. At age 21 the policy automatically doubles in value as long as the premiums are paid.  At age 28 your kid can increase coverage by a factor of 10 at the then applicable rate.

I took a closer look at the $30K policy, with a monthly premium of $20.46.  They say that after 20 years the "cash value" of the policy equals or exceeds the premiums you paid.  That would be $4900 in year 2028.

If you took that $20.46 each month and invested in a college savings plan and it earned an average of 5% or 8%, you would have $8400 or $12K in year 2028.  To me, that makes a lot more sense than an insurance policy.

Would this Grow Up plan make sense for anyone?  The policy makes sense if your child dies, as the payoff would pretty much cover the funeral and burial costs; not much more than that.  Statistics in the U.S. indicate a death rate of 1 in 5000 children aged 1 to 14 and 1 in 1400 for teens ages 15 to 19 (the California rates are roughly 10% to 15% better than these averages). 

Seems to me that the premiums are better spent on college savings then the possibility of death at an early age.

One last argument for the policy is that it guarantees your child the ability to increase coverage by a factor of 10 at age 28.  This would only pay off for someone who otherwise is unable to get life insurance at that age.  To me, this is not worth forking out 27 years of premiums for.