Don't miss out! Get Chief Family Officer's free daily roundup:


  • Check out Chief Family Officer's Thanksgiving Pinterest board for lots of recipes and festive ideas!
  • Recently read and enjoyed: Love Warrior: A Memoir by Glennon Doyle Melton
  • Enter for a chance to win a $15 Starbucks Gift Card! And click here to see all of our current giveaways.

  • Gerber Life Insurance: Is it Worth the Money? (2012 Edition)

    Gerber Life Insurance: Is it worth the money? -

    One of the most popular posts here at CFO is my analysis of Gerber Life Insurance. Since it’s over four years old, I thought it was time to revisit the issue and ask again: Is Gerber Life Insurance worth the cost?

    A few months ago, I discussed when you need (and don’t need) life insurance. The simple answer was that you should buy life insurance if the death of the insured would cause a financial hardship. Usually, that means a breadwinner or caregiver – for example, if Dad is the main source of income and his death would leave the family without enough money to get by, then a life insurance policy for Dad would be a great idea.

    But the death of a child, as tragic an event as it is, doesn’t normally present this type of financial hardship. That’s why I scoffed at Gerber Life Insurance before my children were born – it seemed designed for suckers.

    However, Gerber’s Grow-Up Plan is a whole life policy. Whole life insurance is a little more complicated than term insurance, which only pays out if you die within a specified period of time. With whole life insurance, the policy isn’t for a set period but rather for the rest of your life. Partly because of that, the premium is considerably higher than the premium for a term policy. And, unlike with term insurance, part of the premium of a whole life insurance policy goes toward an investment component. Generally, the return on the investment portion of a whole life policy is such that it’s not considered a good investment, i.e., you could get a better return on your money elsewhere.

    So I look at the Grow-Up Plan not so much for the life insurance component, but as an investment option. Premiums are determined by your child’s age, gender, and state of residence, and are guaranteed to remain the same. Coverage is automatically doubled when the child turns 18. The policy’s cash value will be at least equal to or greater than 100% of the premiums paid after 25 years. As an adult, the originally-insured child is guaranteed the right to purchase up to 10 times the original coverage amount, regardless of health, occupation, and other factors that may render him or her ineligible with other companies.

    For my 7-year-old, a $50,000 policy would cost $37.40 per month, or $448.80 annually. Paying $448.80 each year for the next 25 years is a total expense of $11,220. If I took at that $37.40 per month and invested it in a mutual fund that earned a conservative 3% for 25 years, I would have $16,857.90 – that’s an increase of $5,637.90. If the mutual fund grew at 5%, my total would be $22,796.52. So if I put the money toward the Grow-Up Plan, in 25 years, I’d have cash value of $11,220 (and possibly more), but if I invested the money in a mutual fund, I’d probably have quite a bit more. The tradeoff is that I wouldn’t have the insurance payout.

    Since the coverage doubles but the premium remains the same at age 18, I wondered what would happen if you bought the policy at age 14 (the last year a child is eligible for the Grow-Up plan). The premium on a $50,000 policy for a 14-year-old boy in California would be $47.48 per month, or $573.36 per year. Right now, I’m seeing annual premium quotes for $100,000 whole life polices for 18-year-old males in California for as low as $342. So the $100,000 whole life policy itself doesn’t seem like a good deal.

    My non-expert conclusion is that if you think your child is unlikely to be eligible for life insurance when he or she is older, the Grow-Up Plan is an option you may want to consider now. But it seems like everyone else would be better off investing the money elsewhere – say, tax-advantaged vehicles like 529 plans, Coverdell Educational Savings Accounts, or even your Roth IRA.

    Disclosure: This post has no association with Gerber, although the link to the Gerber Grow-Up Plan is monetized via Viglink. I am not an expert on insurance; consider this post food for thought and consult a real expert for in-depth questions. Read the full CFO disclaimer and disclosure policy here.

    Image via by TCJ2020.

    Should You Buy Long Term Care Insurance and When?

    We’ve previously discussed what long term care insurance is – it generally covers the cost of home health aides, skilled nursing, assisted living, and nursing homes. These are expenses not covered by medical insurance policies and Medicare, so you basically have four choices if you need long term care: 1) buy a long term care insurance policy; 2) save for long term care; 3) rely on family and/or friends; or 4) rely on government assistance.

    The first question, of course, is whether you will actually need long term care – though common sense would seem to say that yes, unless you die a tragic and untimely death, you will at some point require assistance. As I get older, I see my grandparents’ generation requiring more and more assistance. In fact, my husband and I have four living grandparents between us, and all but one receive some form of long term care assistance. The one who doesn’t lives with an aunt, so there’s some assistance there, though not intensive when it comes to day to day life activities. There are all kinds of studies out there, and the lawyer in me tends to be skeptical of studies sponsored by insurance companies, but it’s not hard to believe statistics like at least 70 percent of people over age 65 will require some long-term care services at some point. It seems safe to assume that if we are able to grow old, we will eventually need assistance.

    So assuming we’ll need long term care, let’s also assume that we don’t want to rely on government assistance or impose on family and friends. That leaves us with an insurance policy or personal savings.

    The consensus seems to be that you’ll need to have at least one million dollars in assets (per person) to be able to afford retirement and long term care. If you think you’ll get there in retirement savings before you retire, then you may not need long term care insurance (but keep in mind that the younger you are now, the more you’ll need for retirement – more than one million if you’re quite young now).

    For those of us who are not (yet) that wealthy, long term care insurance may make the most sense. Unfortunately, long term care insurance is like life insurance, in that the cost of the policy goes up as you get older. But unlike life insurance, which you are more likely to need when you are younger because of dependents, you are more likely to need long term care insurance when you’re older. Also, you’ll need to buy the policy while you’re still healthy – so someone who tends to be ill more might want to buy a policy at a younger age than someone who rarely gets sick.

    The worst news is that long term care insurance costs are going up – a lot. Most states regulate the increase in insurance premiums so they likely won’t be allowed to skyrocket, but they can go up 15% per year or more. That means even if you can afford a policy right now, you’ll have to decide whether you can afford increased premiums in the years ahead.

    Thus, whether and when you should buy long term care insurance seems like a really tricky, really personal question. But based on the way premiums increase as you get older, it makes sense to evaluate your health and financial situation and whether to buy a policy in your late 40’s.

    If you are currently in the market for a policy, here are some tips for selecting a long term care insurance policy, as well as some strategies to consider if you can’t afford a full policy, such as choosing a catastrophic policy.

    I’m grateful that I’m too young to worry too much about long term care right now, but I think I might have a chat with my parents about what’s going on with them.

    This post is sponsored by Genworth Financial. All opinions are my own. Read the full CFO disclosure policy here.

    What is Long Term Care Insurance?

    Long term care insurance is exactly what it sounds like: Insurance that helps protect against the high cost of long-term care. Long term care insurance generally covers the cost of home health aides, skilled nursing, assisted living, and nursing homes.

    Long term care is most frequently required due to the normal aging process, after a stroke or vehicle accident, or due to conditions like Alzheimer’s disease, rheumatoid arthritis, multiple sclerosis or diabetes.

    In-home care can consist of:

    • Personal Care Assistants or Companions, who help with household tasks like cleaning, cooking, and running errands
    • Home Health Aides who help with personal care like bathing and dressing
    • Nurses, who help with IVs, medications, and more complex health issues

    Facility care can include:

    • Adult Day Health Care, which offers daytime social and therapeutic activities while still living at home
    • Assisted Living, which allows for independent living with on-site support for daily basics
    • Nursing Homes, which provide more skilled and intense care, supervision, medication, therapies, and rehabilitation

    According to one 2008 study, at least 70% of people over age 65 will require some long-term care and of those who need long-term care, 40% are under age 65. So it’s definitely something to think about getting before you need it, and I’ll discuss that further in an upcoming post.

    This post is sponsored by Genworth Financial. All opinions are my own. Read the full CFO disclosure policy here.

    Strategies for Paying for Life Insurance

    Life insurance can be expensive, and I even once had a friend with wealthy parents tell me that she and her husband didn’t have life insurance because if something happened to them, her parents would take care of their kids. I’ve always wondered if her husband would really be okay with being financially dependent on her parents if something happened to her and he was left to raise their kids alone. It’s not the path my husband and I want to take, so we’ve agreed that life insurance is worth paying for, even if does take a real chunk of money each year.

    There are two components to paying for a life insurance policy – the first is minimizing the cost, and the second is finding the money to pay for it. Here are some tips:

    Minimizing the Cost of Life Insurance

    1. Buy term. Term life insurance is much more affordable than a whole life policy (and I explain the difference here). Be sure to select a term that’s long or short enough to suit your needs. For example, if your child will be graduating from college in ten years, you don’t need a 20-year policy intended to help pay for college.

    2. Buy a group policy through your employer or union. Your employer or union may provide you with a policy, or offer a group policy at a discount. If this policy is only inexpensive up to a certain amount, you can combine it with other life insurance policies.

    3. Compare policies and rates. Different insurers charge different rates, so it’s worth shopping around. There are lots of comparison sites out there, and they tend to be affiliates in it for the referral link payout, so do be careful when using a web site.

    4. Take care of your health. The healthier you are, the more likely you’ll outlive your term policy, so the lower your rate will be.

    5. Don’t buy more coverage than you need. It can be tricky figuring out how much life insurance you need, but overpaying is like throwing money away, since hopefully you’ll outlive your policy.

    Paying for Life Insurance

    1. Pay your premium annually. Most insurers charge a convenience fee for allowing you to break your premium up into multiple payments. If you can afford to do so, pay your premium all at once to avoid paying extra fees.

    2. Use an Infrequent Bills Account to save up the annual premium. Back in 2007, I created an Infrequent Bills Account to hold money for annual and semi-annual bills. I deposit money for those bills into the account each month, and take money out when the bills are due. It makes paying those bills a lot easier when the money for them is already set aside.

    3. Use the Snowflake Method. Take all the little bits of savings here and there that you can find and save them up to pay for that life insurance premium. Or add up your coupon savings and set them aside. If you’ve decided you need a life insurance policy, the important thing is not to wait – you never know what’s going to happen or when.

    This post is sponsored by Genworth Financial. All opinions are my own. Read the full CFO disclosure policy here.

    When You Need (And Don’t Need) Life Insurance

    Most people know that life insurance is an important financial security tool, and for a good reason – it can save your family financially if tragedy strikes. Basically, you pay a set fee for an agreed-upon period of time, and if you die during that time, then the insurance company will give your family a set amount of money.

    But when you do need life insurance?

    The simple answer is that you should buy life insurance if the death of the insured would cause a financial hardship. Common trigger events for buying life insurance include buying a home with a mortgage or the birth of a child. In fact, when each of these events happened to my husband and me, we both acquired a new life insurance policy. With the home purchase, we wanted to ensure that the surviving spouse would be able to pay off the mortgage plus have some breathing room, and with the birth of each child, we wanted to ensure that the kids and surviving spouse would have enough money to pay off the mortgage, pay for educational expenses, and have additional funds for unforeseen expenses.

    Other times you might want life insurance include protecting a business partner who might need funds to keep the business going in the event of your death, if you acquire a dependent such as an aging parent or incompetent sibling, and so on. The question you need to ask is, “Would my death cause a financial hardship on someone I care about?” If the answer is yes, you should consider buying a life insurance policy to relieve that financial hardship.

    On the other hand, you don’t need life insurance if you don’t have any financial dependents. For instance, if you’re single and you buy a home with a mortgage, you don’t necessarily need to buy life insurance to pay it off in the event of your death. After all, these is no surviving spouse who might not be able to make the mortgage payment without the income of the deceased spouse. In the case of the unmarried homeowner, the estate can sell the property to pay off the mortgage, and any profit/equity will revert to the estate for distribution.

    *Previously: How much life insurance do you need?

    This post is sponsored by Genworth Financial. All opinions are my own. Read the full CFO disclosure policy here.