Is Dave Ramsey Right About Life Insurance?


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Think that all life insurance policies are the same?

Not sure if your coverage is sufficient to cover your family’s needs in case of the loss of you or your spouse?

Life insurance can be a daunting thing to consider. At its core, it covers two areas most of us aren’t comfortable examining: Our mortality and our finances.

Life insurance protects our loved ones if something were to happen to us. It provides a financial windfall designed to help ease financial struggles in the emotional fallout of death.

Pretty depressing, right?

It also forces us to assess our current financial situation to both establish how large a policy we can afford and how much we’d want our loved ones to have in case of our passing.

That’s not a whole lot brighter, is it?

Luckily there are a few common-sense approaches that can help keep things in perspective and ensure that we’re getting the most value for our dollar in choosing policies.

Financial guru Dave Ramsey has strong opinions about life insurance. As one of the most recognized financial advisers in the country, we’ll examine his approach and whether it’s recommendable or not.

Who Is Dave Ramsey?

A former real estate mogul, Dave Ramsey, is best known for his financial columns and many broadcasts he contributes to a variety of media.

As an author, broadcaster, and motivational speaker and spokesperson for the online life insurance company Zander Insurance, he’s known for his rigid and disciplined approach to financial management.

Below we’ll take a look at some of his core advice concerning life insurance. We’ll tell you whether it’s worth bearing in mind when choosing the policy that’s right for you and your family.

Dave Ramsey on Cash Value Life Insurance

Cash value life insurance is a bundled package that pairs life insurance with a savings plan. It’s designed to maximize your monthly payments for the largest possible payout.

Dave Ramsey takes a strong stand against this type of investment. He argues that the returns are below market average and that the associated costs and fees with such a policy eat up too much of your money.

In this regard, he’s right. The better option is to find the insurance policy that satisfies your needs and then invest the difference in savings of your own choosing.

This allows you to maintain control of your investments without having to pay someone else for doing the work.

Get Coverage Far Greater Than Your Earnings

It may seem like a year or two worth of income will leave your spouse and family in a good spot to pick themselves back up. In reality, choosing a higher value policy actually allows for more freedom.

As Dave Ramsey argues, choosing a policy that is 10-12 times your income allows your family to invest the insurance payout and live off of the returns.

The financial freedom available here can ensure that your family can be financially secure long after you’ve passed.

Get Life Insurance When Your Young

We often don’t consider life insurance until well into adulthood.

But is it more cost-effective to buy young and healthy or older and with a greater risk of illness?

By securing a policy when at peak health you help guarantee a low rate while giving you the security to know that your loved ones are protected in a worst-case scenario.

Not only that, but the longer you wait the greater the risk of some unforeseen occurrence taking place.

Choosing the Right Length of Term Life Insurance

How long will you need coverage?

It can be hard to think of what the ideal length of insurance policy to take out based on our needs.

The solution Dave Ramsey offers is a practical one: consider how long until your children achieve financial independence.

Think about how many years it will take for them to finish their schooling and establish a life on their own.

This gives you a good idea of how long you’ll require coverage.

As we get older we should have less debt and more equity. If you plan on being mortgage-free and with little to no debt by retirement, then life insurance is no longer needed.

It’s not just that your premiums will go up as you age, but that your spouse and family will be able to cash out the equity you’ve accumulated throughout your life.

Monthly insurance payments at this stage of your life will just chip away at that equity.

However, the math Dave Ramsey offers here doesn’t quite add up. His approach of buying term coverage and investing the rest in mutual funds depends on a predictable growth in the market.

This is not only impossible to plan for but also fails to consider associated fees that come with mutual funds.

So while Ramsey’s recommendation does seem logical, only a dedicated financial advisor can help you understand your current situation and future needs.

Insurance Add-Ons Add Cost

One of Dave Ramsey’s final recommendations is to bypass any insurance riders that your provider may suggest.

These are often more specific payouts like income replacement or waiver of premium.

These add-ons tend to play on your emotional concerns. Often, though, their benefits aren’t worth their extra costs.

The smarter option is to stick with a more standard policy. You can invest the difference in a way of your choosing. This allows you greater control of where your money goes while protecting you from additional fees and premiums.

Is Dave Ramsey Right about Insurance?

There’s a reason Dave Ramsey has become such a prominent personality in the financial advice world.

He offers solid advice with very specific and actionable recommendations.

It’s important to note, however, that the attitude he espouses isn’t a unique one. What he excels at is pushing a common-sense approach to manage your insurance options.

There is value in what he says. What is more valuable, though, is to adopt his approach. Understanding why you’re taking these steps is a lot more empowering than just following the advice.

By recognizing that life insurance is just a tool for ensuring financial security you gain the confidence to consider other investment options.

If you still have questions or want to discuss your options a little further, we’re always here to help.

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Jeffrey Manola

Jeffrey Manola

Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance.

Not only does he strive to provide you with the best rates for your life insurance coverage, but he also wants you to be well informed about the different types of life insurance options that are available. You will also find a significant amount of valuable information on the multiple life insurance companies that can provide you with coverage.

Jeffrey Manola is licensed to provide expert advice and help aid in the purchasing process of life insurance products. He is licensed with the National Insurance Producer Registry (NIPR) in the following states:

AL: 790866 AR: 14358927 AZ: 14358927 CA: 0K29801 CO: 531038 CT: 002536246 DC: 3000281706 DE: 3000190912 FL: W383615 GA: 3089339 HI: 482421 IA: 14358927 ID: 646048 IL: 14358927 IN: 3100885 KS: 14358927 KY: DOI-986908 LA: 758187 MA: 2045330 MD: 3000011601 ME: PRN252004 MI: 14358927 MN: 40427014 MO: 8428106 MS: 10519253 NC: 14358927 ND: 14358927 NE: 14358927 NH: 2434852 NJ: 1562332 NM: 14358927 NV: 3299018 NY: LB-1484031 OH: 1117369 OK: 100293583 OR: 14358927 PA: 740709 RI: 3000183893 SC: 14358927 TN: 2383399 TX: 1969337 UT: 648983 VA: 987464 VT: 3426230 WA: 947010 WI: 14358927 WV: 14358927

Never hesitate to reach out to Jeffrey if you need help. Top Quote Life Insurance is more than just an online quoting agency. We want to help you save money, protect your future, and earn your trust (888) 777-7574.

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Life Insurance Rates?

Purchasing Life Insurance has never been easier

Or give us a call...888-777-7574