Is Dave Ramsey wrong about whole life insurance?

what does dave ramsey say about life insurance

If anyone has spent even a few minutes listening to Dave Ramsey, you realize that he sells motivation, common sense, and enthusiasm more than he sells expertise. Not to say the guy doesnt know his stuff. Im a fan of his and listen to his show from an app on my Android phone. But those who know him also know that. show more If anyone has spent even a few minutes listening to Dave Ramsey, you realize that he sells motivation, common sense, and enthusiasm more than he sells expertise. Not to say the guy doesnt know his stuff. Im a fan of his and listen to his show from an app on my Android phone.

But those who know him also know that he can very, for lack of a better expression, dogmatic about his financial theories. One area is life insurance:

Dave: NEVER EVER BUY WHOLE LIFE, only buy term. Invest the difference in premium in "good growth stock mutual funds" and you'll have alot more.

I have a few problems with that.

First the dogma. All truth is reasonable, so theres no need to go nuts on a matter if its true

Second, all he's really saying here is that instead of "investing money in life insurance, invest money in the stock market." The reason why the reward is so much greater is because the risk is so much greater as well.

But in a reasonable estate plan, the goal is more about security for your survivors than getting rich.

Third, Any reasonable estate plan also factors in dramatic life changes. For instance, an incurable disease in its late stages, such as cancer. If you only have term coverage, when your term runs out, you cant buy another policy because no one will insure a cancer patient. With no cash from insurance, a person risks losing a significant portion of their nest egg to estate taxation. Or with no cash at all, a person risks losing personal property to pay it.

I personally would suggest that a person make reasonable estimates of what their estate will be worth at

death. Estimate that the Federal estate tax exemptions will be $1,400,000. I say this figure because it splits the difference between the lowest estate tax exemption in history ($650,000) and the highest ($3.5 million) and and rounds it out.

Buy at least one whole life policy that can cover that tax liability. If you project an estate worth less than the 1.4 million dollar exemption, therby making you Federal estate tax free, buy a low whole life policy, around $100,000, so that funeral expenses and other things are covered without your family having to liquidate your assets to pay them, or if you live long enough for the cash value of the policy to be higer than the death benefit, (which usually takes at minimum 20 years) you get to enjoy a hefty sum of unexpected money while your still alive.

Meanwhile, follow Daves advice in having insurance equal to 10 times your households annual income. If your family makes 50 grand, and you already have the 100,000 whole life, buy 400,000 in term insurance to make an even $500,000

Investing in the markets may very well cause you to end up with more money. But thats only if all goes well, like you never dying in an accident. Building wealth is a good thing, but I dont think its more important than ensuring that your family is taken care of regardless of what happens to you.

Update: Rick B: You're forgetting that if you die you get the death benefit with insurance. With investments, all you have is the value of the investments. If I die after two years of investing the premium in something safe, like CDs, my family gets, $1,100 give or take. But with the policy, my family would get $100,000. show more Rick B:

You're forgetting that if you die you get the death benefit with insurance. With investments, all you have is the value of the investments. If I die after two years of investing the premium in something safe, like CDs, my family gets, $1,100 give or take. But with the policy, my family would get $100,000.

Source: answers.yahoo.com

Category: Insurance

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