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Q: What Type Of Life Insurance Do I Need?

2011 November 10

Dave Ramsey only recommends guaranteed level term life plans since it is the most affordable type of protection and it allows you to focus on more pressing financial issues. The basic premise for cash value plans which  includes Whole Life, Universal Life, Variable Life and Return of Premium plans, is that you will need life insurance your whole life so the plans overcharge you in the early years to pay the higher costs in the later years.  Dave’s opinion is that if you buy term life insurance then you avoid this overpayment period and use the savings to attack debt and to build savings.  Over 15-20 years with your debt eliminated and your savings grown you no longer need life insurance.  The insurance industry for years has convinced the public that you have to have life insurance for your whole life.  You only need life insurance for a period where your premature death would cause your family financial hardship.   Once you are out of debt and grown your savings then the need for life insurance is eliminated and so is the expense…especially at a time when the prices tend to get higher as you get older.  It also makes no sense to save money in a poorly performing insurance plan while you still have more expensive credit card or other debt.

This is why Dave typically recommends 15 or 20 year level plans since he feels that you can accomplish very significant financial progress over this period so that you greatly reduce and eventually eliminate the need for life insurance.  At younger ages he does feel that considering a 30 year plan is OK 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 8 to 10 times their income.  This level of protection will generally allow for a continuation of the financial lifestyle for the remaining family members and allow debt related issues along with education funding, emergency needs, and final expenses to be addressed.  This is why Zander Insurance only offers level term life plans. You can compare rates at Zander Insurance or call Zander Insurance at 800-356-4282 for personal assistance.

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