The Gerber College Savings Plan states clearly on its website that it's adult life insurance with a guaranteed payout that can be used to pay for college (or not), but that doesn't mean it's the best use of your college savings dollar. Why isn't it the most efficient way to pay for college? The website claims that it's the "only college plan that's also adult life insurance," and it's worth noting that colleges don't include life insurance policies in their student aid assessments - so storing that money in a life insurance policy may be able to help some families with financial aid. If you use that money to provide a death benefit for your family, it's life insurance. In that way, it's both college savings and life insurance: If you use that money to pay for college, it's college savings. If the worst happens and the policy holder passes away, the family gets the payout. While you can cash in the policy before the end of the agreed-upon term, you only get the cash value up to that point - not the full amount you had planned. (They didn't tell me the taxes part - that's from Chuck Jaffe's scathing takedown of the policy on MarketWatch, where he also calculated the return on the "safe investments" and determined it was "virtually nothing.") At the end of that period, you get a lump sum, which you will need to pay taxes on. You pay a monthly premium determined by your time frame and chosen value, and that money is invested in what the representative called "safe investments." In fact, the way she put it was that "it doesn't matter what the economy does," because you'll still get your payout. In other words, you'll lose money by canceling your child's policy before his or her 25th birthday.Account icon An icon in the shape of a person's head and shoulders. Once your policy has been in effect for 25 years, it will be equal to the total value of the premiums that you've paid over the policy's life. After this initial probationary period, it will grow at an accelerating rate. You'll probably be disappointed to learn that your surrender value will be nonexistent for the first several years during which your policy is effective. If you scan your policy's documents, you'll notice some "fine print" that discusses the rate at which your policy accumulates its surrender value. Unfortunately, Gerber Life imposes strict conditions on policyholders who wish to cancel their policies. In most cases, this should be expressed as a percentage of your total monthly premiums. To determine the rate at which your policy's surrender value is growing, look at your past six statements and calculate the rate of increase. This figure will be noted near the bottom of the document. To determine the current surrender value of your policy, look at your most recent statement. The cash value of a given Gerber Life policy is equal to its "surrender value." If you become unable to afford your policy's premiums and wish to cancel it, you'll be entitled to receive its full surrender value upon cancellation. If you take out such a loan, be sure to pay it back as soon as possible. Since they accrue interest at an annual rate of at least 8 percent, these loans are best used as short-term credit facilities. In most cases, the entirety of a given policy's cash value is available for use as a loan. However, policyholders who find themselves in desperate need of cash and lack adequate savings reserves may tap their policies' cash values for loan funds. In most cases, policyholders simply allow their policies' cash values to grow over many years. Over time, your policy will slowly accumulate a "cash value" that can be used for various purposes.
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