Dave Ramsey is a finance guru. However, you are much more than a financial expert. Dave Ramsey is an accomplished businessman, author, radio personality, and motivational speaker. My wife and I went to Dave’s Financial Peace University with our church 8 years ago and benefited from his financial advice and strategies. I have read his books and I have listened to him a lot on the radio.
Dave Ramsey frequently addresses the topic of life insurance in his books and on his radio show, so I feel compelled to write a review regarding his views on this important topic. I hope you see in this article that I am a fan of Dave Ramsey and that I appreciate how he has helped thousands of people get out of debt and turn their lives around. At the same time, I want to point out a few things that the average consumer might not understand. Some of what I’m about to share could save you a lot of trouble, headaches, and money.
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Before pointing out some areas of disagreement, let me first underscore my respect and appreciation for what Dave Ramsey does. Not only have I heard some tremendous debt elimination stories on the radio, but I know some people who have had great success following Dave’s advice (via FPU). So, I’ll share a bit of my story first and then get into the points of disagreement.
I heard a little bit about Dave Ramsey early in my career. His presence on our local radio stations was not extensive (as it is today), but I listened to him whenever he could. As a rookie financial advisor in the early 2000s, I was eager to learn as much as possible. When my wife and I started the Financial University of La Paz in 2008 (FPU), our children were still young, but we had already bought a lot of life insurance. As a financial advisor and agent, I have understood the importance of life insurance. My wife was (and is) a stay-at-home mom, so we were dependent on my income.
We never had a lot of debt, other than our mortgage, but we learned a lot about budgeting and how to make smart decisions with our money. Dave Ramsey was just a source of information. I have often listened to Clark Howard, a popular Atlanta radio host. In addition to these radio personalities, I have read numerous books on the topic of life insurance and financial planning. It was and is my job and my passion.
The influence of Dave Ramsey
Although we didn’t cut our credit cards (as Dave often recommends), we did make some changes to our spending habits. We developed a budget (or “spending plan”) and made some necessary and beneficial adjustments. Over the years, I have learned a lot about life insurance and, as an expert, I have disagreed with Dave on some points. If you’d like to read more about “my story” and how my view on the “term life versus permanent life” debate evolved, please click here.
In other articles, I specifically discuss how Dave Ramsey views things about term life insurance, whole life insurance, and disability insurance.
Great Tips From Dave Ramsey – Highlights
You don’t need to extensively review Dave Ramsey’s advice on life insurance. You can easily read what Dave (and Zander Insurance) has to say about life insurance online. Although I know Dave’s views on life insurance through his radio show, I spent a lot of time reading the material on his website. Also, I had to dust off my Financial Peace Revisited book and my FPU workbook so I could go through all of Dave’s material.
Dave has a lot of great points related to life insurance, so I’m going to highlight the best ones using bullet points. Then I will move on to the points of disagreement.
- Don’t wait too long to buy life insurance (premiums go up, coverage is lacking, and you could develop a disease that makes you uninsurable).
- Buy more than you think you need. Term life insurance is very cheap; Most people don’t make sure enough and regret it later.
- Buy a term policy that is long enough. Many people make a mistake when buying a shorter (less expensive) policy but later regret it.
- Consider purchasing disability insurance. This is “forgotten insurance” and it is a high-risk area that people often neglect.
- Avoid agents who think Whole Life or Universal Life can take care of all your protection and investment needs.
- Avoid unnecessary riders on your term life policies.
- You are probably reading this article to find out where I think Dave may be wrong. If you’re like me, you don’t want to hear everything positive. When I’m shopping on Amazon or anywhere else online, I quickly jump to the negative reviews to see if they make any valid points. So let’s jump to the “negative” points.
Disclaimer: I am not trying to discredit or discredit Dave Ramsey. Many others write about their disagreement with Dave’s advice. Some of the arguments are well reasoned and compelling: others are unpleasant in tone and challenge Dave’s character. Hopefully, you will agree that my points of disagreement are rather the first.
Dave Ramsey Life Insurance Review – Where Dave Goes Wrong
- My first point of contention with Dave Ramsey is his insistence that people should never buy cash value life insurance.
- I agree that for the vast majority of people, a term life policy is the most appropriate type of coverage. However, there are many cases where a GUL (Term for Life) policy or a cash value policy makes sense. I elaborate on this in other articles, but let me mention just one point that made me reject Dave Ramsey’s advice to “always buy on time.”
Charge-Only Financial Advisors (Not Licensed Insurance) Recommend Permanent Life Insurance
- Dave only recommends one agency to quote life insurance
- Zander Insurance is the one (and only one) agency Dave Ramsey recommends for life insurance quotes and purchases. Although Zander Insurance is a good independent agency, they only work with limited companies. They don’t work with several of the best life insurance companies that have some of the lowest rates in the industry. For example, they do not offer Ohio National Life Insurance.
- As an example, some people looking for coverage could save $ 15 / month with Ohio National. That doesn’t sound like a lot of money, but over 30 years, that adds up to $ 5,400 – regardless of the opportunity cost of investing that money.
- Dave Ramsey benefits financially from his relationship with Zander Insurance. This is fine. However, it would be great if you referred people to ELPs (Endorsed Local Providers) who are independent agents. Let people choose from various experts. They can choose from several local experts with other types of insurance, tax services, and real estate through the Ramsey ELP program. I think it is a good idea to offer this type of service to people who are looking for like-minded and ethical professionals. I considered becoming an ELP 10 years ago but decided it was not worth the fee.
- Dave does not distinguish cash value insurance from permanent life insurance
- Cash-value life insurance is a type of insurance (like whole life or traditional universal life) that falls under the umbrella of permanent life insurance. Another type of permanent insurance is Guaranteed Universal Life Insurance (GUL). This type of permanent life insurance is not designed to build cash value but simply provides permanent life insurance. Some people call it Term Life Insurance.
- I fully agree that having adequate life insurance is the most important thing when your children are most dependent on your income. Buying term insurance for 20 or 30 years makes a lot of sense. At the same time, invest money so that you are financially secure when the term ends. That is a simple and effective plan that works for most people.
Term life beyond 20 or 30 years
- However, some people want term insurance to last beyond 20 or 30 years. That’s where Guaranteed Universal Life insurance (also known as Term to Life or Term to 100 years) can be appropriate. None of us know if our investments will grow as we expect. This is especially true for people who invest in mutual funds. Additionally, there may be other unexpected setbacks in life where life insurance might be necessary beyond age 30. After all, it is insurance. Many people like the idea of staggering their life insurance. Tiered policies allow you to keep some life insurance in force as your need for coverage “decreases.”
- We have numerous clients who have most of their coverage in term insurance but have between 10% and 25% in a guaranteed universal life (GUL) or other permanent policy.
- Again, Dave does not mention that there is a type of permanent life insurance that does not have an investment component and is not designed to earn cash value. If you go to Zander Insurance you will only see term policies up to 30 years.
- Dave Ramsey only recommends one insurance company for disability insurance.
- I applaud Dave for the time and attention he has given to disability income insurance. Many people do not consider this type of coverage. In the case of life insurance, there are dozens of top-rated insurers. There are only 10 or 12 top-tier disability insurance companies. Some insurers are very strong in certain professions and others have unique product designs.
- Unlike term insurance, disability policies can vary greatly in policy design, including how they define key policy provisions. For this reason, we offer several top companies, including Principal Life, MetLife, Guardian, Mass Mutual, Illinois Mutual, Ohio National, Mutual of Omaha, Assurity Life, and a few others.
- I was disappointed to see that Dave only recommends one disability insurance company through Zander Insurance – Assurity Life. Security is an A- carrier and has some good products. However, I think it is important to compare Assurity’s disability insurance policy with other companies.
- Since disability insurance is more complex, it is much easier to offer just one carrier. However, you deserve to see more than one option.
- Dave Ramsey’s advice on selecting a term policy is overly simplistic
- When you ask the question, “Which company should I select for term insurance?” Dave’s advice is mostly correct: Find the best price from a reputable company. Term policies are mostly similar, so I agree that price is one of the most important factors. However, you do not take one very important consideration into account when selecting a term policy. I cover this in-depth in my article, Dave Ramsey’s Thoughts on Term Life. When you have two or three companies that have almost identical rates, how do you choose?
Conclusion of my Dave Ramsey life insurance review
- I hope you found this informative article. I’m glad Dave Ramsey has helped thousands of people get out of debt and turn their lives around. Dave also provides solid advice on life insurance, for the most part. I think Dave could help his listeners more by encouraging them to shop with more than one agency for life and disability insurance.
- Dave Ramsey’s advice to “always buy term” has probably helped many people avoid purchasing a cash value policy that was inappropriate for their situation. We need Dave Ramseys in our world! However, we also have to look at the bigger picture and realize that Dave might not be right in all of his advice.
- I hope my points of disagreement help you evaluate your options and make the best decision for you and your family. Like Dave, I want you to make sound financial decisions and protect your loved ones from financial hardship.
- Please call us for life and disability insurance advice or quotes and we will be happy to assist you.
