There is no doubt that Dave Ramsey is a financial Guru, and he is a lot more than just a financial expert. Dave Ramsey is an accomplished businessman, author, radio personality, motivational speaker, and much more. He has made quite a good name for himself in the personal finance community in the past decade.
Dave Ramsey addresses quite frequently about life insurance in his book and the radio show. Therefore, writing a review concerning his opinions on this critical topic seems necessary. There is no doubt that Dave hates debt, and he is very clear about this matter in his message towards the public.
From his books to the podcast and the blog content, he is unequivocal in his mind that there is no space for any type of loan in your life. Along with hating loans of any kind, Dave also hates Whole Life Insurance, and when he finds out about his followers considering it, he tries to stop them right away.
Who is Dave Ramsey?
Dave Ramsey is called America’s trusted voice in money and business. He is a personal money-management expert and quite a popular national radio personality. His best-selling books like Financial peace, More than Enough, EntreLeadership, etc. have sold more than 11 million copies combined.
When he reached 26, he established a $4 million real estate portfolio and lost it by the age of 30. By using wisdom, he gained and rebuilt his financial life and now teaches others how to be responsible with the money. It could be possible for them to acquire enough wealth to take care of themselves, their family, and give generously to others.
Ramsey offers a life-changing message as host of a nationally syndicated radio program, The Dave Ramsey Show. This show is heard by 14 million listeners every week. He is also the creator of a Financial Peace University that helps people dump their debt, take control of their money, and learn new behaviors around money.
Dave Ramsey’s idea on Whole Life Insurance
It is worth noting that in many different situations, Dave’s advice tends to be generalized. The business model of Dave Ramsey is systematized, and this includes his opinion on Whole Life Insurance. Dave always goes against buying Whole Life Insurance or any type of Permanent insurance plan.
When listening to Dave or any of his advisors, you will be advised to buy term life insurance and also invest your savings into the mutual funds. Mostly Dave suggests placing your money in an index or mutual fund that will give you a return of 12% – 18% rate.
Dave always states that Whole life insurance is not an investment. To him, if anyone is investing any money into this product, he/she is wrong. Most of the people agree with Dave that Whole Life is not a place to spend.
Dave’s excellent advice
One doesn’t need to review Dave Ramsey’s advice on life insurance that extensively. It is easy to read online what Dave has to say about life insurance. Although we know Dave’s opinions on life insurance through his radio show, there is a lot of material available to read on his website.
Dave has a lot of high points about life insurance, so we will just highlight the best spots:
Do not wait too long to buy life insurance. The premiums increase, the required coverage is missing, and you might develop an illness that may make you not to be able to get insured.
Buy more than you think you need. The term life insurance is inexpensive; most of the people underinsure and later regret it.
Buy a long enough term policy. Most of the people prefer buying a shorter term policy that is less expensive and regret it later.
Consider buying disability insurance. Disability insurance is forgotten insurance and is an area of a significant risk that people usually tend to neglect.
Avoid those agents who think that Whole life insurance or universal life insurance can take care of all your protection and investment needs.
Avoiding unnecessary riders on term life policies is a great option.
Where Dave gets it wrong
People should never purchase cash-value life insurance
Dave keeps on insisting that people should never purchase cash value life insurance. I personally do agree that for the majority of the people, a term life insurance is the most suitable type of coverage.
There are many instances that the Whole life policy or cash-value policy makes sense. Many brilliant financial advisors recommend cash-value life insurance for some clients. These financial advisors make no money from the policies and are not even licensed for selling any insurance.
They basically have nothing to gain from recommending cash value life insurance, but they see it as a legitimate part of a financial plan for some people. There are various independent financial experts who recommend cash-value life insurance, but an average consumer wonders if they stand to benefit from their advice.
Dave only recommends one agency
It is worth noting that Dave only recommends one agency for the life insurance quotes and purchase, and its name is Zander Insurance. Although Zander insurance is no doubt a good independent agency, they only work with limited carriers.
Some folks shop for coverage that could potentially save them some money. That doesn’t seem like a lot of money, but over the 30 years period, it adds to a good amount, not taking into account the opportunity cost of investing this amount of money.
It is very clear that Dave Ramsey benefits financially from Zander’s insurance. This is totally fine, but it would be great if he referred to the people who are independent agents. He should let people choose from multiple experts. They can choose from various local experts with other types of insurance, tax services, and real estate.
Failure to distinguish between cash value and permanent life insurance
Cash-value life insurance is a type of life insurance such as whole life or traditional universal life insurance that falls under the umbrella of permanent life insurance. Another type of permanent life insurance is the Guaranteed Universal Life insurance, which is not designed to build the cash value but simply provide permanent life insurance. A few people call it a term for life insurance.
It is agreed that it is most important to carry adequate life insurance when the children mostly depend on your income. It does make sense by buying term insurance for 20 to 30 years. At the same time, it is a good idea to invest money for financial security when the term period ends.
Some people want the term life insurance to last beyond 20 to 30 years, and that is where the Guaranteed Universal Life insurance can be suitable. It is unknown if our investments will grow according to our expectations. This is true for people investing in mutual funds.
What Dave doesn’t mention here is a type of permanent life insurance that lacks the investment component and is not basically designed to earn cash value. If you happen to visit Zander Insurance, you will only see term policies for up to 30 years.
One insurance company recommendation for disability insurance
Dave must be appreciated for the time and attention he gives to the disability income insurance. There are many people that disregard such coverage. There are dozens of top-rated life insurance carriers, but there are around 10 or 12 top-tier disability insurance carriers.
Unlike term insurance, disability insurance policies can vary greatly in policy design. This includes how they define the key policy provisions.
It is disappointing to see that Dave only recommends only one disability insurance company through Zander Insurance i.e., Assurity Life. Assurity life undoubtedly has some good products, but it is important to compare its disability insurance policy to other companies. As disability insurance is more complex, therefore, it seems much easier to offer only one carrier, though you deserve to see more than one option.
Dave Ramsey’s advice is overly realistic
When a question is posed about selecting a company for term insurance, Dave’s advice is mostly correct i.e., Find the best price from a reputable company. The term policies are similar most of the time. Therefore, it is agreed that price is one of the most critical factors.
There is one very important consideration that Dave Ramsey misses when it comes to selecting a term policy. How do you choose when you have two or three carriers that have nearly identical rates? Some of the carriers have good convertibility options, while others do not.
Take an example of Ohio National’s two industry-leading term products. The low price basic product is convertible to one permanent product, while their plus product is fully convertible to any permanent products that they offer. There are a few companies that have very limited or even no conversion options.
Should we buy Whole Life?
Here a question arises that should we buy Whole life or we shouldn’t. Whole life insurance can be one of the most valuable assets that you buy, and it can provide you with guarantees that a term life insurance policy certainly cannot provide.
If you are still in major debt, then one would agree with Dave by not buying a Whole life policy yet. In fact, one would certainly suggest that you go for an affordable term insurance policy. Not all the term products are the same, and you can buy a term policy from a strong mutual company. This will give you an option to change your policy into a Whole life insurance policy in the future if you need one.
Most of the followers of Dave most likely have ongoing issues with their budgeting and money management. Therefore, for them, Whole life may not be an appropriate fit. Whole life is not a very complicated product, but it is far more detailed than the term life insurance.
Dave always says no to loans. This is where is I believe he sees whole life to be the second biggest issue for his followers is that to access the cash being saved in a taxed advantaged manner. With this, you sometimes use the loan feature on a specific policy.
It is quite clear that Dave doesn’t go for loans or debt, even if it is to obtain a tax advantage. Therefore, this option would be out of the question. I completely understand and agree with his view, but from that perspective, if he suggests Whole life, then ultimately he might contradict his advice. So the only solution for Dave is never to recommend Whole life insurance.
Dave Ramsey is quite clear on his views about Whole life insurance and any type of permanent life insurance product in the market. For him, it is not a good fit for anyone who tends to listen to his advice. I do believe that a big reason for this approach is that Dave’s key demographic has much bigger issues like income restrictions and major debt. Therefore, considering whole life insurance as part of his financial recommendations would create confusion among his followers.
Rather than sparking any type of interest to his listeners, Dave shuts down any consideration of whole life insurance and will only suggest term life insurance. Although I have a strong belief that Dave is over-generalizing his advice, he is going to help more people in the bigger picture.
In reality, permanent or whole life insurance products are actually very good savings and provide various tax advantages for high-income earners with no debt. It is quite clear that this is the case when you consider that the banks and various different corporations own millions of Whole life policies. Compare us to Globe life Insurance or Colonial Penn. The average cost of a funeral is $8500.00
The always buy term of Dave Ramsey has probably helped numerous people avoid buying a cash value policy that was inappropriate for their situation without any doubt. People need Dave Ramsey. However, people also need to look at the larger picture have a realization that Dave might not be correct in all of his advice.
Hi, I’m Mitch Winstead with Advanced Mutual Group. I have been helping people with burial insurance for over 20 years. If you have any questions or would like a quote with no obligations, call our office our toll-free number is 1-866-598-8170. Or you can email us at firstname.lastname@example.org We have top rated carriers with the lowest rates. Our policies are state-regulated. We have AIG Insurance and Mutual of Omaha burial insurance. Our website is http://www.advancedmutualgroup.
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