Why Term Life Insurance Instead of a Cash Value Plan?

Dave Ramsey only recommends term life insurance – never cash value plans (whole life, universal life, variable life, return of premium, etc.). The reasons for this are simple: term life is cheaper, and you only pay for the time period you need. The concept of needing insurance for your whole life is a myth constructed by insurance companies to get your money. In reality, if you are saving your money and paying off debts, you won’t need life insurance in 15 or 20 years – so why pay for it? It doesn’t make sense to invest in a life insurance plan either – the return on investment is low, not to mention the fact that saving is simply not what insurance is for. Life insurance should be a safety net for your family in case something happens to you while they are financially vulnerable – not a tool used to make profit.

As far as term length goes, Dave typically recommends 15 or 20-year level plans, which he feels provide enough time for you to accomplish significant financial progress as you greatly reduce and eventually eliminate the need for life insurance. At younger ages, he does believe that considering a 30-year plan is reasonable, since they allow a more time and are useful if you are just starting out your family. Additionally, Dave typically recommends that families carry an amount of life insurance equal to 10-12 times their income. This level of protection will generally allow for a continuation of the financial lifestyle for the remaining family members and allow time to attack debt-related issues, education funding, emergency needs, and final expenses. Get a free, personalized quote on our website, or call one of our Guides at 1-800-356-4282 for personal assistance.