Most financial celebrities and entertainers tend to recommend term insurance for its low cost. As a class, they usually vilify all forms of permanent life insurance and the agents and advisors who offer them.
They almost always suggest that you can invest the difference between the cost of term and permanent and come out ahead. I've never heard any of them take taxes, liquidity, risk, shielding from creditors, etc into consideration.
Dave Ramsey sells a financial plan where you only need term life insurance. He recommends 10 to 20-times your annual salary. He likes for you to buy it through his agency (Zander) and they will sell over the phone nationwide.
The reason his plan only needs term is because if you follow his plan you will be wealthy at the end of the 20 or 30 year term and will no longer require life insurance.
The mistake people make is if they only do bits and pieces of the plan they will end up in bad shape when their term runs out. They will end up older, NOT wealth and completely uninsured.
Some of the things his plan requires for the average person to be successful are:
1. Take on 2nd and 3rd jobs to pay down all debt. Get Gazelle intense on paying off ALL debts (other then your mortgage) quickly. Pizza delivery is a favorite for Dave.
2. Sell any cars with large loans (over $3,000) on them. Even if you owe more money than the car is worth. Buy "beater" cars for cash. Don't pay more than $1,500 for your beater car if you have debts.
3. If your house payment is more than 1/3 of your net income, sell it too. Rent or buy a cheaper house.
4. Always buy low cost term life insurance at least 10 times your annual salary. Also always buy disability insurance. Do NOT buy Long Term Care Insurance until you are age 60 and then DO buy it.
5. Do NOT take vacations, go to the mall, eat out in restaurants, etc. untill ALL debt is paid in full other than your mortgage. Eat beans and rice and then rice and beans. Buy clothes at rummage sales and 2nd hand stores. Patch the kids clothes. During this phase you won't see the inside of a restaurant unless you're working there.
5. Once your debts are paid off, focus on paying off your mortgage as soon as you can. You can lighten up a little now and go to a movie once a month or something to reward yourself.
6. After the mortgage is paid in full, you can now start socking money away and build your net worth. Dave recommends your company 401K up to the amount that they match. Any amount you can invest beyond that you put in growth stock mutual funds. He likes you to do this through his "Endorsed" local provider in your area. He tells you to expect an AVERAGE of 12% + annual returns on your investments with his endorsed providers.
7. After you have saved up a lot of money and have zero debt...you have made it. Now you can live like no one else. Your term life insurance is no longer necessary because you have piles of cash. You are self insured.
This is a brief outline of Dave Ramsey's plans to explain why he believes no one needs whole-life insurance. To get more information listen to his daily radio show and read his many books.
I have no connection to Dave Ramsey and I am not one of his providers. I personally do not believe his plan works for most people because they will not do what it takes to become wealthy and debt-free. It is very easy to shoot holes in his investment and insurance advice (in my opinion) but he is a great motivator to pay down debts and live within your means.
In my opinion, both term and whole-life insurance have their correct and incorrect uses. In Dave's opinion, only term makes sense.
Dave Ramsey recommends term life insurance to protect your family during your working years. His strategy is to pay off all debt including your mortgage and invest in mutual funds. His premise basically states that your debt should be paid off and your retirement plan funded by mutual funds should eliminate most financial obligations at retirement; therefore permanent insurance is unnecessary and too expensive anyway.
Dave Ramsey recommends having eight to ten times your income in term life insurance. There are a number of life insurance carriers that offer the term life insurance products that Dave Ramsey recommends, and those products can be purchased on many different websites on the internet...the price is the same for the same product.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
I have read one of Dave Ramsey’s books but I am certainly not an expert. I think Dave Ramsey would say to have the amount of life insurance that you need in place when the need arises. A policy that has expired or is inadequate defeats the purpose of life insurance. While I realize that Dave Ramsey advocates term insurance, the key remains the same. Make sure you have enough when the need arises. If you investments reduce your risk and need for life insurance, that is fine but make sure that you have the risk covered. You are valuable and you love people who will be hurt terribly if you don’t make it home today.
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They almost always suggest that you can invest the difference between the cost of term and permanent and come out ahead. I've never heard any of them take taxes, liquidity, risk, shielding from creditors, etc into consideration.
The reason his plan only needs term is because if you follow his plan you will be wealthy at the end of the 20 or 30 year term and will no longer require life insurance.
The mistake people make is if they only do bits and pieces of the plan they will end up in bad shape when their term runs out. They will end up older, NOT wealth and completely uninsured.
Some of the things his plan requires for the average person to be successful are:
1. Take on 2nd and 3rd jobs to pay down all debt. Get Gazelle intense on paying off ALL debts (other then your mortgage) quickly. Pizza delivery is a favorite for Dave.
2. Sell any cars with large loans (over $3,000) on them. Even if you owe more money than the car is worth. Buy "beater" cars for cash. Don't pay more than $1,500 for your beater car if you have debts.
3. If your house payment is more than 1/3 of your net income, sell it too. Rent or buy a cheaper house.
4. Always buy low cost term life insurance at least 10 times your annual salary. Also always buy disability insurance. Do NOT buy Long Term Care Insurance until you are age 60 and then DO buy it.
5. Do NOT take vacations, go to the mall, eat out in restaurants, etc. untill ALL debt is paid in full other than your mortgage. Eat beans and rice and then rice and beans. Buy clothes at rummage sales and 2nd hand stores. Patch the kids clothes. During this phase you won't see the inside of a restaurant unless you're working there.
5. Once your debts are paid off, focus on paying off your mortgage as soon as you can. You can lighten up a little now and go to a movie once a month or something to reward yourself.
6. After the mortgage is paid in full, you can now start socking money away and build your net worth. Dave recommends your company 401K up to the amount that they match. Any amount you can invest beyond that you put in growth stock mutual funds. He likes you to do this through his "Endorsed" local provider in your area. He tells you to expect an AVERAGE of 12% + annual returns on your investments with his endorsed providers.
7. After you have saved up a lot of money and have zero debt...you have made it. Now you can live like no one else. Your term life insurance is no longer necessary because you have piles of cash. You are self insured.
This is a brief outline of Dave Ramsey's plans to explain why he believes no one needs whole-life insurance. To get more information listen to his daily radio show and read his many books.
I have no connection to Dave Ramsey and I am not one of his providers. I personally do not believe his plan works for most people because they will not do what it takes to become wealthy and debt-free. It is very easy to shoot holes in his investment and insurance advice (in my opinion) but he is a great motivator to pay down debts and live within your means.
In my opinion, both term and whole-life insurance have their correct and incorrect uses. In Dave's opinion, only term makes sense.