A class action lawsuit claims that Gerber Life Insurance Company’s savings plans such as the Gerber Life College Plan and the Grow Up Plan provide “no meaningful savings benefits.” The plaintiff says that she signed up for the Grow-Up Plan for all three of her grandchildren and made this decision based on Gerber’s advertisements that the plans would provide cash value when each child turns 18. Instead, she allegedly found out that the cash value accrued for one of her grandchildren’s plans would be less than 55 percent of the value she paid. Ring of Fire’s Farron Cousins discusses this with Scott Hardy, President of Top Class Actions.

Transcript:

*This transcript was generated by a third-party transcription software company, so please excuse any typos.

Farron Cousins:                  Anybody who’s ever spent any time watching daytime TV or if you watch any game shows in the evenings, I guarantee you, you have seen commercials for the Gerber Life Grow Up Plans. We all know that phrase. We have seen these commercials. A lot of us remember them from the sick days back in school when you’d watch the Price Is Right, you’d always see these commercials everywhere. Not many of us understood what they were or, you know, what it even did. But according to a new lawsuit, that’s because these plans really don’t do anything at all.

Joining me now to talk about this is Scott Hardy with Top Class Actions. Scott, I grew up on these commercials, you know, the Gerber Life Grow Up Plan, the Gerber Life College Plan, and I’ll admit once I had kids, I thought, you know what, maybe, maybe this is a type of thing I should look into. Maybe it’s something I should do. And if this lawsuit is, is, is telling us the truth, which we have no reason to necessarily doubt it, I’m very glad I didn’t do that because these plans might be essentially worthless.

Scott Hardy:                          Yeah, I was surprised by this. I remember, you know, I’ve got two kids just like you, we would, we see these commercials all the time. See the Gerber Plan, Gerber is such a well respected brand name out there that we think that it would be a trust, you know, truthful advertisement that, you know, we can, you can buy. And a lot of people are putting their money into these plans and according to this class action they have, they’re getting nothing out of it or very little. You know, it’s gotten to the point now where it’s not just a Gerber Grow Up Plan where people think that they’re putting this money in. Well, if they put their money in for the Grow Up Plan for this nest egg and they paid $260 in premiums, it’s only actually worth 27 bucks. That’s it.

So it’s a massive net loss for the consumer. And I think what really kind of grinds me is that Gerber is pushing a College Plan now and the college plan functions similarly, but really only pays out if the kid dies. Otherwise, this college plan doesn’t have any characteristics that let it function as a college savings plan. So you are much, much, much better off if you have a kid, you have a grandchild that you, that you want to help save for, start that college savings plan, do not go with Gerber on their college savings plan because it’s not going to actually put that money towards your grandchild’s college fund. And, you know, that’s what these class actions are alleging and trying to fix, is get that truth back in marketing. And if they’re going to market this as a College Plan, make sure that money is going towards that kid’s college and that they don’t have to die for it to pay out.

Farron Cousins:                  And a lot of the reason that these plans are attractive to people is because they think that, okay, well this obviously as you said, it’s a well-respected brand. This is more of an investment type thing because I could take this money that I was going to pay each month and just put it into a savings account. And then when the child turns 18 it’s, here you go. This is the college money I’ve saved up for you. But no, we think, okay, well this is more of an investment. They know what they’re doing. They know how to handle money. I don’t understand any of that. I’m going to put it in here. This is going to pay off 10 fold and my kid or my grandkid is going to be taken care of. But if this lawsuit, again, if it’s correct, they’d have been better off putting that money into the savings account because as they calculated, even if you were to pay on the Grow Up Plan for 40 years, you would still have less money in the Grow Up Plan than if you’d just put that monthly payment into a regular savings account for the child.

Scott Hardy:                          Exactly, you know, some of these are showing that it would be less than 55% of the money they put in. So you’re putting this money in every month. You’re thinking that it’s actually a kind of a savings plan, that it’s not just an insurance premium and 55% of that money you put in is gone. That’s profit. That’s take, you know, that’s all going to the business and it’s not going to your loved one. And, you know, it just goes to show that when you’re looking at anything that’s an insurance plan, anything that’s a savings plan, you have to find out and read through the fine print to find out where your money is going. How much is that broker keeping? How much is that salesperson keeping? You know, what is actually going to go into your account that you’ll be able to collect? There’s just so many bad fiduciaries out there that you have to be so careful.

Farron Cousins:                  And I think that’s, that’s kinda the big thing that we have to understand as a public too. Obviously there’s lots of different financial institutions out here. There’s lots of different companies that, you know, say, give us your money, let us invest it. And at the end of the day, depending on what the purpose of that money is, sometimes it is better and safer if you simply take what you can and put it into a savings account. I mean, you may not get, you know, a 20% return on investment as you could possibly do if you had a great stock broker but that money is going to be there. Right? The money in the savings account is not going to go anywhere.

You’re not going to risk losing all of it or, you know, not having it be able to be withdrawn because there wasn’t a time frame met and oh the kid’s still alive but, so he can’t get it because it was actually an insurance policy. You avoid all of that with just putting it into a savings account. Again, not going to get as much of a return but there’s pretty much zero risk that you’re not going to be able to access that money.

Scott Hardy:                          Exactly, they have tax deferred saving, college savings plans, which actually do invest in the stock market because, you know, if you put, that baby is born and you’re a grandparent, you want to put 1000 bucks or 100 bucks or, you know, you want to put $50 a month into that plan, you can put that money in there and that money will go to your child, to your grandchild. And that money will grow along with the market. Or if you just want to play it safe, just like you said, put that in a savings plan. Get that 2%, 3%. Know that in 18 years when that child is going to go to college that, that they will have money and hopefully a good start to be able to start their college education.

Farron Cousins:                  Absolutely. So for more information about the Gerber Life class action, follow the link in the description of this video. Head over to Top Class Actions and if you haven’t already done so, make sure you sign up for their weekly newsletter. Scott Hardy with Top Class Actions, always a pleasure talking to you. Thank you.

Scott Hardy:                          You’re welcome. Thanks for your time, Farron.

Farron Cousins is the executive editor of The Trial Lawyer magazine and a contributing writer at DeSmogBlog.com. He is the co-host / guest host for Ring of Fire Radio. His writings have appeared on Alternet, Truthout, and The Huffington Post. Farron received his bachelor's degree in Political Science from the University of West Florida in 2005 and became a member of American MENSA in 2009. Follow him on Twitter @farronbalanced