(Of course, a bank will not pay a death benefit if the insured passes away prematurely.) But that’s a gain of only $604! … And that’s an annual growth rate of just over … umm … 0.0%.Īccording to the analysis of the Gerber College Plan, you’ll do much, much better – with average earnings of 2.0% (you’d be hard-pressed to find a bank paying even 1% as of March 2022) – using a passbook savings account at an online savings bank. Let’s do the math: Dad will have made premium payments totaling $24,396 ($184.82 per month for 11 years = $24,396). Then he will receive a $25,000 payout he can use to help cover her college expenses – or for anything else. Dad will need to pay $184.82 every month for 11 years, until his daughter is 18. So, our hero in this example, the Dad, takes out a $25,000 Gerber College Fund life insurance policy on himself, and he plans to mail his premium monthly. In any case, $25,000 isn’t going to do a whole lot to help the little girl in our example get through four years (or more!) of college. What will college cost in the future? The average cost of college has more than doubled in the 21st century, growing by 7.1% per year, which is faster than the average increase in personal incomes. Now, according to the Education Data Initiative, the average cost of college tuition and fees in 2023 is is $37,641 at private institutions, $9,377 for state residents at public colleges, and $27,023 for out-of-state residents attending public universities. Let’s say a 28-year-old father in good health wants to have $25,000 for his seven-year-old daughter when she starts college in 11 years. Here’s an example from a Gerber Life Insurance Company representative we spoke to. Three Unpleasant Surprises You’ll Face with the Gerber College Plan Surprise #1! The scheduled payout from your Gerber College Plan is only slightly more than your total premium payments! You don’t owe any more money, and Gerber washes their hands of any responsibility to provide further life insurance protection for you under the policy. If the person who is insured passes away before the payout is due, they’ll send the payout to the beneficiary without waiting for the scheduled payout date.Īt the time the money is paid out, the policy ends. Come up with a premium payment every month that’s rather exorbitant for the value you’ll receive, as you’ll understand in a minute.Īt the end of the agreed-upon term, Gerber Life Insurance Company will send you a check for the payout you specified.And no, even though it would be much, much cheaper to insure the child instead of the parent or grandparent, Gerber won’t let you do that. Generally, you’ll want to insure whoever will be making the monthly payments, since the policy will pay off if the insured person dies. Tell them when you want to have the money – anywhere from 10 to 20 years from now.Tell Gerber Life Insurance Company how much money you want to have for college.Without this feature, if the insured person didn’t die during the term, the term policy would simply expire – evaporate – at the end of the term, and all the premiums paid would just go to increase the insurance company’s profits.Īs a parent or grandparent of a child who will presumably attend college someday, Gerber says you only need to do four things: It includes an expensive feature that causes the policy to pay off whether the insured person lives or dies. Gerber puts a term life insurance policy on one of the parents. How Gerber Uses Life Insurance to Help Families Save for College If the insured individual dies prematurely, the payout is made upon the insured’s death. The payout is guaranteed by Gerber Life Insurance Company, so families know from the start the amount they will receive at the end of the term. The payout at maturity is the total of all premiums paid, plus a small amount of interest. The Gerber College Savings Plan is a type of life insurance for adults called “return of premium term life insurance.” The policy matures in 10 to 20 years, typically at the time the child is expected to start college. What Exactly Is the Gerber College Savings Plan? Check out the book The Bank On Yourself Revolution, the New York Times best-seller about the best way to use life insurance as the foundation of your family’s wealth-generating strategy.īut the kind of life insurance Gerber uses in its cookie-cutter one-strategy-for-all-people is not an efficient way to save money – or buy life insurance. It’s true: Using the right kind of life insurance can be an excellent savings strategy. Forty years later, Gerber’s started selling life insurance … promoting it as a way to save money to put Baby through college.
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