Best Answer: The answer can be found in the life insurance policy. Speaking from experience, there is probably very little cash value in it of $0 to less than $100. It will take until you are 95 to 100 years old for there to be $5000 in cash value. I feel sorry for your grandparents for being duped into buying Gerber Life Insurance. They probably been told that it was some sort of savings plan, which is clearly is not. While it may of been cheap, a healthy 30 year old could of bought a 20 year level term of $100k coverage for about the same price.
How this policy generally works is that a parent or grandparent buys this policy on their child and pays the premiums until you are 21 years old. At age 18, coverage should of doubled to $10,000. At age 21, policy ownership is transferred to you and you will be paying premiums until you are dead or 100 years old. At age 21, you can get up ten times the amount of the current coverage without any medical underwriting. Under IRS tax laws, the cash value cannot grow faster than a 7 year worth of payments of a whole life insurance policy. It also cannot grow faster than the face amount of the policy at age 95. If it does, the life insurance policy will lose its tax advantages such as tax-deferred growth and tax-free on death benefit. With these two laws, your cash value grows at a very low rate of return. When there is cash value, you can borrow it and pay loan interest of 8%. If you decide to cancel the policy, surrender charges will be deducted from the cash value. If you
die someday, the insurance company pays the death benefit (the $5000) to your beneficiary, but they keep all the cash value.
Life insurance's purpose is to replace income in case you die. When you were a baby, what income did you provide to your family? Absolutely nothing. So there was no need to buy life insurance on a child. If your parents was worried about you dying at a young age, then should of add a child rider to their own life insurance policy. Since your grandparents were duped into buying this policy for you, its very likely that your own parents are being ripped off by their own life insurance policy by paying excessive amount of premiums for a low amount of coverage.
If you believe you need life insurance, get a 30 year level term life insurance and at the same time, save or invest your money for the future such as retirement. Term life insurance does not build cash value, therefore the premiums are inexpensive and you can get the right amount of coverage you need at a low cost. If you do the right thing with your money by paying off any debts you have quickly and investing your money, you should have no need for life insurance at the end of the term. If you do, you probably don't need as much coverage.
Knowing the facts, you should ask if your parents and grandparents have life insurance and ask if they read their policy. Ask if you can read them so that you can be educated about how they work and make inform decisions when it is time for you to buy life insurance (which is usually a time when you are married and have kids).