Term Life Insurance Advice from Dave Ramsey

Term Life Insurance Advice from Dave Ramsey

Term Life Insurance Advice from Dave Ramsey

Is it the best strategy to follow the Term Life Insurance Advice from Dave Ramsey? If you haven’t already heard of Dave Ramsey, he is a successful real estate expert who understands the highs and lows of investments and money management.

Dave Ramsey learned many valuable lessons as he went from having nothing to becoming a millionaire, and then losing it all. He has now rebuilt his fortune and he is focused on helping others find their own financial freedom. He is a well-respected radio host who offers his listeners genuine debt and investment advice. Is his advice right for you? Let’s find out! This article is going to go over several of Dave Ramsey’s “pros and cons of life insurance“.

PROS

Term life insurance is the most affordable type of coverage.

CONS

Term Life insurance only provides coverage for a specific period of time.

Whole Life Insurance is Not a Good Investment

One thing Dave Ramsey feels strongly about is that whole life insurance is a waste of your money. He feels it is better to buy term and invest the difference that you save each month in mutual funds.

Click here for reviews of the best term life insurance companies.

Cost of Whole Life & Term Life Insurance 

According to Dave Ramsey, if a 30-year-old man purchased a $125,000 term policy over 20 years, it could be as low as $7 per month. The same whole life insurance policy would cost that man closer to $100 a month. He has proven that you can make more money investing the extra $93 on your own than you would on a cash value whole life insurance policy.

Term Life Insurance
$7 per Month
Whole Life Insurance
$100 per Month

Differences of Whole Life and Term Life Insurance

What are some of the main differences of term life and whole life insurance

Differences of Whole Life and Term Life Insurance

You Can Actually Lose Money with a Whole Life Policy

Dave Ramsey explains that the average whole life insurance policy will only gain somewhere between two to seven percent. In some cases, you will even end up with less money than what you put into it. The same mutual fund with an independent broker will average around ten to twelve percent growth each year.

This is because you will lose about three years’ worth of earnings due to commissions and overhead expenses. Whole life insurance companies are using your money to make money for themselves and then charging you a fee for it.

Term Life Insurance is the Better Choice

Term life insurance is just basic insurance. It will make sure you are covered if anything happens to you, and it will only cost a small fraction of the price. It gives you peace of mind you deserve while freeing up more of your money for real investment opportunities.

Buy Term and Invest the Difference

Dave Ramsey advises his online followers and radio listeners that all they need is insurance to cover them until they achieve their own financial freedom. If they choose term life insurance and then use the extra money they saved in sound investments, they will earn a higher return on their investment, which they can put aside to pay for their final expenses. He strongly emphasizes the need to focus on making money now, then you won’t have to worry about having enough life insurance later.

Whole Life Isn’t the Bad Guy

I definitely agree with Dave Ramsey when it comes to getting term life insurance instead of whole life, especially if you are young and healthy. Getting cheap term life insurance is the most affordable method of life insurance available. In fact, if you use a life insurance laddering strategy – you can save even more!

Switching from your whole life insurance policy could free up significant funds for more lucrative investments.  However, I don’t believe it’s wise to say term life is best for EVERYONE. Life insurance needs are always unique.  It’s usually a bad strategy to follow an “all or nothing” strategy. It’s too simplistic and there are situations where whole life is the right choice.

The first thing you can do is compare whole life and term life quotes. You can start by getting a free life insurance quote right now, or you can give us a call.

If you’re not sure where to begin, give us a call. Our agents provide a free, no-pressure, educational approach to life insurance. We’ll compare dozens of the top companies in minutes to show you your most affordable options. Toll Free: (888) 411-1329

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Michael Quinn

Michael Quinn

Michael is owner & life insurance expert at Life Insurance Blog where we've helped thousands of shoppers learn and secure affordable life insurance online.
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