There are many things parents can do to prepare their children for the future. They can move to a neighborhood with better schools. They can pay for after-school activities or extra tutors. And they can obtain life insurance, so their families—and especially their children—are protected financially in the event of their death.
But life insurance on their kids, pitched by the company behind the most popular brand of baby food on the market?
Excuse me while I spit up.
Yes, I’m talking about Gerber, which in addition to its iconic jarred food and other baby products relentlessly advertises something called the Gerber Life Grow-Up Plan. It’s a life insurance plan that almost no child needs.
You might have noticed Gerber pitching it on Twitter:
And on Facebook:
And on television, too. The product, the commercials say, can “help give your child a good start for just pennies a day.” Another says the company is “accepting applications,” which is the sort of statement that implies it once wasn’t or that the process has a degree of exclusivity. Actually, the Gerber Life Grow-Up Plan has been “accepting applications” for about 45 years, and while parents do need to answer a series of questions, no medical exam is required. Most infants are quite healthy, after all.
In the financial industry, the Gerber Life Grow-Up Plan is what’s called whole life insurance. That means it offers purchasers not only life insurance on their child but an investment that will grow over time, something known as a cash value, which can be borrowed against. (Gerber representatives declined to be interviewed for this article.)
If you go to the Grow-Up Plan website, you learn that if you live in New York, it will cost $7.22 a month to insure a 3-year-old child. That is, indeed, 23.7 pennies a day, or $86.64 a year. Sounds inexpensive enough, especially for something that offers the promise of being not only life insurance but an investment, too.
But what’s the value of that investment? When I called the advertised 800 number, I discovered the cash value would begin in the policy’s fourth year with—get this—$27. By the time the insured child turned 18, it would have grown to $705.60.
By that point, the policyholder would have paid $1,299.60.
Parents would be better off putting that $86.64 a year in an emergency savings account or, if they’re saving for college, turning to a more appropriate instrument like a state-sponsored college 529 account. Heck, parents would be better off sticking the money in a mattress. After 15 years, the cash value of the mattress would be larger than the cash value of the Gerber Life Grow-Up Plan.
But wait, that $86.64 also pays for an insurance product, right? It does—but children don’t need life insurance. When an adult buys life insurance, the sum is intended to replace a multiple of his or her salary, so that in the event of the policyholder’s death, bereaved loved ones don’t find themselves in financial extremis. In some cases, this can be expanded to cover the labor of a nonworking parent. The loss of a child, on the other hand, is a tragic, almost unfathomable event, but it’s not an economic loss unless the child is, say, an actor or reality TV star.
Kids also aren’t likely to need another benefit that Gerber pitches as an advantage—the ability to automatically renew the policy for up to $100,000 at the age of 21, no matter the state of their health. First, the vast majority of people in their early 20s are healthy enough to obtain life insurance. Second, there are insurance companies that will issue even middle-aged people policies without requiring a medical exam. You almost certainly don’t need the Gerber Life Grow-Up Plan as an in to obtain insurance later.
And then there’s the occasional yuck factor. Just like adult life insurance, the children’s version occasionally figures in tabloid-like murders. There’s the sad story of Maryland toddler Prince Rams, whose father is set to go on trial on charges of murder. Prosecutors say Rams’ father drowned him in an attempt to collect on $560,000 in life insurance policies on the child issued by a number of companies, including MassMutual, Globe Life and Accident Insurance Company, and, yes, Gerber. There’s another such case in Georgia, where dad Justin Ross Harris is also awaiting trial on murder charges. Prosecutors say he killed his 22-month-old son by deliberately leaving him strapped in a car seat on a hot day. According to news reports, the suspected motives might include the hopes of collecting on two life insurance policies totaling $27,000 on the child’s life.
Not surprisingly, it’s all but impossible to find a personal finance type willing to say a good word about children’s life insurance, no matter which company offers it. Dave Ramsey calls the Grow-Up Plan the “Gerber Life Throw Up Plan.” It makes regular appearances in MarketWatch investment writer Chuck Jaffe’s long-running feature, “Stupid Investment of the Week.” Juvenile life insurance is so unnecessary that even the insurance industry doesn’t always speak up for it. “The case for it is not very strong,” admits Steven Weisbart, a senior vice president and chief economist at the Insurance Information Institute, an industry trade group.
So why does this product exist at all? Well, it’s helpful to think of children’s life insurance as something of a vestigial organ. According to sociologist Viviana Zelizer, juvenile insurance was introduced by the Prudential Life Insurance Company in 1875, emerging at a time when society was transitioning from viewing children as an economic contributor to the family to seeing them as a source of emotional sustenance worth spending money on.
Children’s life insurance appealed to poverty-stricken moms and dads who might not otherwise be able to afford the elaborate Victorian customs surrounding death. Millions of people signed up for it. “It was not the hope of ready cash but the desire for a proper mourning ritual that prompted poor parents to invest their meager funds in premiums,” Zelizer writes.
By the beginning of the 20th century, the weekly visit by the insurance salesman to collect premiums became something of a staple of working-class life. In the classic novel A Tree Grows in Brooklyn, it’s the family insurance agent who counsels the newly widowed and broke Katie Nolan, telling her how to cash in her children’s policies while keeping her own:
If anything happens to one of the children, God forbid, you could manage to get them buried. Whereas if something happened to you, also God forbid, they couldn’t get your buried without insurance money, now could they?
But as the children’s mortality rate fell over the course of the 20th century, the insurance companies’ pitches changed. By the 1930s, companies barely mentioned death. Instead, they talked about children’s life insurance as a way of investing in their future, a line that continues to this day, even as better options—like 529s—are now available.
Of course, it’s likely that today’s buyers of children’s life insurance don’t realize they’re putting money in the financial equivalent of an appendix. Personal financial literacy isn’t high in the best of circumstances, and many parents of infants or toddlers—the group the Grow-Up Plan is pitched at—probably aren’t familiar with government-sponsored, tax-advantaged college savings plans.
But I suspect children’s life insurance continues to appeal for another reason. Even if analysts estimate that it now only makes up about 1 percent of the overall life insurance market, it’s all but made for our financialized age. In a society where we are relentlessly prodded to view every aspect of our lives in financial terms, where college is seen as a financial and not intellectual investment, putting a dollar value on a life is a way of demonstrating love. Even if it’s the life of a child.