Does it Make Financial Sense to Buy Life Insurance for Children?
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Back in June 2008 I took a look at the Gerber Life Insurance Grow-Up Plan after seeing a TV commercial. I suppose with one kid jumping off the couch and the other one horsing around near the light socket that perhaps I could have been immediately drawn to the plan. But does the average kid really need a life insurance policy? Since 4 1/2 years have passed by, let's take another look.
The plan is summarized at www.gerberlife.com. It is a whole life policy with coverage ranging from $5K to $50K ($35K in 2008). You can purchase a policy for your kid or grandkid anytime between the age of 14 days to 14 years (the high end was 12 years in 2008). At age 18 (previously 21) the policy automatically doubles in value as long as you pay the premiums. Your child can subsequently increase coverage by a factor of 10 at the then applicable rate under the plan when they become an adult.
This time I looked at the $35K policy, which for a boy under the age of one has a monthly premium of $21.05. Hmm, sometimes it pays to be a girl...the cost of a girl's policy is $17.52, nearly 17% less than the boys' policy.
Let's stick with the boy's premium. They say that after 25 years (this was 20 years in 2008) the "cash value" of the policy equals or exceeds the premiums you paid. So for a 2 week old baby boy that would mean you'll have paid in $6,315 by the time junior is 25 years old in the year 2038.
There's a 1 in 5,555 chance that your child will die between the ages of 1 and 14 in the United States, based on recent statistics (1 in 6,666 chance in California). Inversely, there's a 5,554 in 5,555 chance your kid will NOT die by the age of 14. Those stats change to 1 in 1,900 for teen
