Do you need life insurance? Here’s what Dave Ramsey thinks
The financial guru has great advice on life insurance.
- Life insurance could protect your loved ones in the event of your death.
- Dave Ramsey thinks life insurance is a great idea, but there’s one specific type he’s a fan of.
If you have people in your life who depend on you financially, then life insurance is an important thing to have. This is a point on which many financial experts agree, and Dave Ramsey is one of them.
As someone who urges consumers to avoid debt at all costs and take control of their finances, Ramsey is not one to advocate unnecessary spending. And so if he tells you to buy life insurance, you better listen to him.
That said, there is one specific type of life insurance that Ramsey tends to favor. And it’s a type that you can find more than affordable.
Choose term life over whole life
Term life insurance will cover you for a predefined period of time. You could get a term life insurance policy that lasts 15 years, 20 years or more. The duration of your coverage should depend on your personal circumstances.
If you are applying for life insurance for the first time when your children are in their mid-teens and your spouse is turning 50, a 10-year policy may be sufficient for you. The logic is that in 10 years your children could be out of college and working full time. During this time, your spouse could be close to being able to collect Social Security and be at an age where they can access funds from an IRA or 401(k) without penalty.
On the other hand, if you just had a baby, you might want to opt for a 25-year term life insurance policy. This way, your child would be covered until adulthood.
Either way, Dave Ramsey thinks term life insurance is a better deal than whole life insurance. Whole life insurance covers you permanently, so you will never go out of your insurance coverage. However, whole life insurance policies can be prohibitively expensive, so it’s best to stick with term life insurance and guarantee premiums you can actually keep paying.
How much coverage do you need?
Just as the length of your term life insurance policy depends on your personal circumstances, the amount of coverage you get should be based on your family’s specific needs. As a general rule, says Ramsey, “Get coverage equal to 10 to 12 times your annual income.”
It’s definitely a good place to start, and it’s also reasonable coverage to have. That said, you may want to increase this amount to cover other expenses, such as unpaid debts (like your mortgage) and funeral expenses. You may also want your life insurance policy to include funds that could potentially be used for your children’s education.
So let’s say your current salary is $60,000. You can choose to obtain coverage equal to 12 times this amount, or $720,000. You can also add an additional $150,000 to cover your mortgage balance, plus $10,000 for funeral expenses, for a total of $880,000. And if you have two children, you can decide to increase this amount up to $1 million so that there is extra money available for education costs.
The advantage of life insurance is that you can adapt it to your family situation. And in doing so, you are giving your loved ones the protection they need and deserve.
Life insurance protection for you and your family
While many varieties of insurance coverage are designed to help protect a person’s family and assets, life insurance is an essential type of protection. The right life insurance can help protect the people who depend on you most if you die. Choosing the right life insurance policy is essential to ensure the right protection for your loved ones. We’ve sorted through the different options to bring you our picks for the best life insurance policies available today.