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Lets be clear, Dave Ramsey is a financial entertainer. His debt free strategies are great but he gets paid for his recommendations, including his life insurance recommendations which we'll focus on in this article.
Term Life Insurance is a type of life insurance which provides life insurance coverage for a fixed amount of time, usually with a fixed rate of payment. The policy will only pay out if the life insured dies during the term of the policy. It is however, the least expensive way of buying a large amount of death benefit as it does not accumulate any future value and is purely a means of ensuring that your loves ones would be debt free and financially secure if you were to die unexpectedly.
Dave Ramsey says to only buy term life insurance. We believe for middle America, most would be better off with term life insurance (or a mix of term and permanent) but that's not always the case. There are lots of situations where permanent coverage is necessary. Every situation is different and this is blanket advice that Ramsey is giving. Just a word of caution.
How much life insurance coverage should I buy?
Radio host, financial guru and author, Dave Ramsey, recommends buying at least ten to twelve times your annual income amount in life insurance coverage to ensure that your family’s needs would be taken care of should you die.
This may seem excessive and you may think that if you have life insurance coverage supplied by your employer, this will be sufficient. However, if your employer offers any kind of life insurance coverage it is doubtful it would actually be sufficient to financially care for your family for any length of time.
Having more than adequate life insurance coverage will ensure that should the worst happen and you were to die, you would be guaranteed that your loved ones would not have to worry about money, all your debts would be paid off and they could still have the life and future you had planned for them to have. It is also worth taking out adequate life insurance coverage for your spouse, as if they were to die suddenly and you had children they would still need to be taken care of and that would then fall to you. Without the security of life insurance coverage it would be an immense struggle to both work and adequately care for a family.
Factor all of that in when determining how much life insurance coverage to buy. Again, Dave Ramsey is making a blanket statement with his 10 times your annual income remark. Without knowing your current assets, your age, how many dependents you have etc., it's hard to make a recommendation. 10 times your annual income could be to much or not enough coverage for your family.
Even if you are looking to purchase a million dollar life insurance policy, we can help!
Don’t put off buying Life Insurance Coverage
The important thing to remember is, not to wait to buy life insurance coverage, if you have loved ones, sooner is better than later.
If you have no kind of life insurance whatsoever and you unexpectedly die, your loved ones will be left to struggle financially and your children may not then have access to the same level of education and lifestyle you had planned for them.
It is also worth remembering that as we get older we tend to get more health issues, so if you wait too long before buying adequate cover you may well end up paying a significantly higher premium each month and this can really mount up in the course of a year.
Also don’t be fooled into thinking you need to be debt free before buying life insurance, it is at the time when you have debts and responsibilities that you most need the security that life insurance coverage brings. Don't leave your loved ones stuck with your debts if something were to happen unexpectedly.
If time is a factor, consider a no medical exam life insurance policy.
Make sure you have an adequate length of coverage
Think carefully, make sure that you buy adequate life insurance coverage for the right length of time and don’t try to save a few dollars by taking out a policy for a shorter time than you really need. If your life insurance policy does not run for long enough and you later have health problems when your policy comes to an end , a new policy may well cost more.
Failing to buy a long enough policy could mean that you might ultimately end up paying higher premiums to keep the same level of coverage, or, worse may find that you are unable to even get the type of life insurance coverage you really need.
Dave Ramsey's suggestion is that you should ensure that you have enough life insurance cover to last at least until your kids have headed off to college and/or are living on their own, this could be at least a twenty year plan depending on how many children you have. We agree to base this as a minimum length of coverage.
Keep your life insurance coverage up to date
Make sure to occasionally check that the life insurance coverage you have in place is still adequate for your needs and that you are buying from a reputable and that company doesn't have to be Zander Insurance which Dave Ramsey is paid to recommend (read our review of Zander Insurance here). Just know you can do better.
Families change over the years and so do their needs and financial requirements. It may be that you now have an improvement in wealth and have more available money, you may have decided to purchase a retirement plan, or have accumulated savings or investments. Your income may also have changed and could have gone up or even down so any change in income is definitely a time to review the amount of cover you have in place and to ensure it is still adequate for your needs.
Make sure you take the time to check out your level of coverage at least once a year and certainly after any change of circumstances. It is all too easy to think that you have got life insurance coverage so that is it and your family is secure, but is it enough? Don’t get complacent and just assume that the level of cover you had five years or even just a year ago is still adequate, take some time to read through it all and check the small print, also, make sure that it is still valid and has not unexpectedly expired.
Make sure you have adequate life insurance coverage
Invest in adequate life insurance coverage from a reputable insurance company, Also make sure that not only are you are paying a rate you can afford, but also that the benefits are enough for your particular circumstances. There are many plans to choose from and many companies out there, but by investing a little time and discussing the types of policies that would be most suitable to your particular needs, you can ensure that financial security for you and your loved ones will always be there.
If you have any questions whatsoever about life insurance, feel free to give us a call or you can get instant quotes to see just how affordable life insurance can be.