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For over 20 years I have worked personally with Dave Ramsey, his listeners and team members to help them make important and informed decisions about their insurance needs and the most cost effective ways to address them. Through the years I have responded to over 10,000 of Dave’s listeners regarding their insurance questions.

This blog contains many of the most frequent questions and answers since they provide an excellent resource to Dave's specific advice on very specific insurance questions. I hope you find this information to be a valuable resource that you can refer to many times in the future as you progress along your financial path. Click on the category noted which relates to your question so that you can see the posting currently available. If you do not see your question or still have concerns please don't hesitate to use the "Question Widget" noted on this site for further information or call us toll free at (800) 356-4282.

Many people are surprised that the advice from Dave and I doesn’t always involve the purchase of insurance as the only alternative. Insurance is a key component of any family's financial plan but it can also be a drain and a detriment if the wrong plans are purchased. Implementing the plans and approaches that Dave and I recommend, most importantly, the establishment of an emergency fund, will help reduce a families overall insurance costs and allow them to focus their dollars on more important things such as getting out of debt and growing wealth.

− Jeff Zander

What is the Supplemental Disability Income Rider (SDIR) on a Disability Policy?

2018 July 3
by zanderins

The SDIR acts as an offset and actually helps reduce your cost, taking part of your benefit amount and discounting the cost since it will integrate with social programs such as social security and workers’ compensation. If you qualify for payment under a social plan, the insurance company will reduce the amount paid to you by the amount of monthly benefit you receive from the social program. For example, let’s say you have a disability benefit of $7,200 and $1,800 with your SDIR. You are guaranteed to get the total monthly benefit of $9,000, but the $1,800 SDIR may not all come from the insurance company. If you receive social security or workers’ comp payments, your rider will simply “top off” those payments to get you to $1,800 in benefit. The real advantage is that, even if you don’t receive social security or workers’ comp for your disability, you will still get that entire $1,800 SDIR benefit in addition to the $7,200 disability benefit.

Long-term disability (LTD) is a crucial part of your overall insurance plan, and many companies will try and load you up with benefits since they sell one product at a time and do not take an overall view of your financial strategy. Dave recommends that you have a quality LTD plan without overspending on it, since it that would dilute your ability to pay down debt and grow your savings. You also need to remember that the chances you’ll ever be out of work due to disability is still limited, so it is important to balance the expense with other priorities, such as term life insurance, health insurance, retirement planning, etc.

What is the Own-Occupation Rider on a Disability Policy and Do I Need It?

2018 July 3
by zanderins

The own-occupation rider is a nice benefit to have, but not crucial depending on your line of work and budget. Many people who work in non-specialty fields overpay for this benefit since there are few disabilities (outside of the most severe) that would limit you from performing the principal duties of most occupations. This rider was primarily marketed to specialty physicians when it was introduced, and the experience has gone poorly for the insurance companies.

With Zander, the own-occupation rider is offered as an optional benefit; Dave typically only recommends it based on the room in your budget and where you are in the Baby Steps. However, Dave would not recommend spending money on it if you do not have your emergency fund established and are still struggling with debt – it is not a priority over those issues. With older policies, the own-occupation rider may already be included. If this is the case for you, unless you are finding a plan with similar coverage or your budget has gotten really tight and you need to remove the rider to fund other priorities, consider keeping what you have.

Should I Keep My Cash Value Plan if I Wouldn’t Save Money by Switching to a Term Policy?

2018 April 18

If you would not save money by switching to a term life policy, we generally advise keeping your existing plan and factoring those expenses into your budget. You should, however, make sure your current plan is not underperforming (i.e. the dividends or interest are not keeping up with the increasing costs of insurance as you get older). If that is the case, then eventually you will have paid more for the existing policy than it is worth. You can also request an “in-force ledger” from your current insurance company, which will project the life of the policy at the current premium paid and the interest rate/dividends being paid to make sure the policy does not falter in the future.

Remember that as you pay down debt and increase your savings, your need for life insurance decreases, meaning you can slowly reduce the amount of cash value life insurance you have, then redirect those funds to better investments.

Not sure if you’d save by switching to a term life policy? Compare quotes for free on our website.

Should I Consider a Combined Life and Long-Term Care Plan?

2015 May 27
by zanderins

The combination of life and long-term care insurance policies is sometimes referred to as a “hybrid policy.” These are created by purchasing a cash value life insurance policy and a rider that allows the cash value of the policy to be used for long-term care (LTC) expenses. Conceptually, and from a sales perspective, these hybrid plans seem to make sense. Looking more closely, however, there are serious flaws. First and foremost: the life insurance plan that these additional coverages are coupled with are cash value type policies such as whole or universal life. Dave is adamantly against these types of plans, and coupling them with an LTC benefit does not increase their appeal. In most cases, these added benefits are inferior to plans you can purchase independently and are simply not worth the risk. Many of the LTC benefits in a hybrid plan are limited to either the amount of benefit paid, the types of services covered, or the length of benefit period.

Both types of protection are important enough to warrant their own policies. Dave recommends that you buy a term life insurance policy right away if you have debt that your estate cannot pay and/or if your death would put your family’s financial well-being at risk. As you attack debt and grow savings, you are actually reducing – and, eventually, eliminating – your need for life insurance. Your need for long-term care insurance, on the other hand, is increasing during this time. Incurring an expense for life insurance when it’s no longer needed so you can keep your long-term care protection makes no sense! In short – you need life insurance and long-term care insurance at different points in your life, and getting them combined is an expense you just don’t need.

Get more information on long-term care insurance or get a free, instant term life insurance quote.

Why Am I Eligible for Lower Monthly Benefit Amounts if I Am a Federal Employee?

2015 May 11
by zanderins

Almost all federal and Veteran’s Association (VA) employees are enrolled in the Federal Employees Retirement System (FERS), regardless of the agency at which they work, and are provided with reduced disability insurance retirement benefits under the FERS. The plan provides 60% income replacement during the first 12 months that disability insurance benefits are paid, and 40% for each year thereafter until reaching early retirement age, at which point the FERS pension begins to be distributed. Most insurance carriers base their offering on a 40% group insurance factor. However, there are some carriers that stop offering coverage once a federal employee has more than 10 years of service or reaches age 50 or 55.

Does Dave Recommend Waiver of Premium Riders?

2015 March 13

Dave Ramsey does not recommend purchasing “waiver of premium” riders. As a percentage of cost, the rider is an overpriced add-on that makes the insurance company a lot of money and rarely benefits the client. A waiver of premium rider states that you do not have to pay the premium if you become disabled. However, the definition of “disability” is so strict that very few people actually qualify. In addition, term life insurance rates are typically very low and can be funded by your emergency fund if you have short-term income issues, then through your long-term disability insurance if loss of income due to disability continues for a longer period.

How Long Do I Need to Be a Non-Smoker to Qualify for Better Rates?

2015 January 16

Insurance companies typically only require that you be tobacco-free for 12 months before offering a non-tobacco rate. This is not their lowest Preferred Plus rate, but still represents a strong savings as compared to the smoker rates. If you have not gone a full year tobacco-free, it really depends on the time you have left to reach this accomplishment. Dave still recommends buying the longer term period, which is more expensive, but just for the one year. It locks in your rate at a younger age and is still beneficial in the event you do not complete the entire 12-month period. If at 12 months you are tobacco-free, you can apply for a new non-smoker plan and benefit from the lower rates. At the three-year point, you are eligible for the Preferred Plus health class (lowest rate), if you would otherwise qualify for it . Dave’s primary advice is that you get what your family needs now since we can’t predict the future, and then adjust as things improve. You can compare term life insurance rates online or call us toll free at 1-800-356-4282 for personal assistance.

Should I Purchase an Annuity?

2014 August 18

Dave is not totally against annuities, but they should be a low priority in your financial journey. Dave advises against making an annuity type investment while you are still in debt and/or if you have not maxed out other investment options (such as your employer retirement plan and possibly even a Roth IRA, which grows tax-free). If you are at a point where you have paid off debt and have utilized all other more lucrative options, an annuity does offer some tax-deferred growth and can be part of your financial plan. When you reach this point, Dave recommends variable annuities over other type since they allow for investing in stock mutual funds with the tax preferred protection of the annuity. You may want to contact one of Dave’s Investment ELPs to compare options to the plan you are considering.

Are the Benefits from a Life Insurance Policy Taxable?

2014 April 10

As long as some very simple rules are followed, the death benefit from a life insurance policy is free from federal income taxes. There are a few situations where certain IRS or accounting rules, if violated, could make it a taxable event. For instance, if a business pays for a life insurance policy and deducts the cost of the policy as a business expense, which is not allowed, the death benefit could then be taxed. Another instance is if the owner of the policy, the insured, and the beneficiary are three different people – in this case, the death benefit could be considered a gift, and thus subject to tax. It is also advisable for individuals with larger estates not to be the owner of their policy since although the beneficiary may not be taxed, the value of the policy could be included in the owner’s estate tax valuation. These are uncommon situations, leaving the vast majority of life insurance proceeds untaxed.

Does a 7702 Private Plan Make a Cash Value Plan a Better Deal?

2014 January 24

There has been an increase in the amount of companies offering 7702 private plans. This is a fairly interesting development since there is nothing to legally define a 7702 plan, meaning the use of the term “7702 plan” is arbitrary. It is just another “sales tactic” of agents to sell cash value plans – which are inherently flawed. The 7702 plan is a marketing term used to allow an existing set of insurance products, typically variable life plans, to borrow some of the reputational credibility of an IRA or 401k plan. There is an IRS code 7702, however this section addresses the tax implications of life insurance contracts and does not bestow any additional benefits by naming a plan under this label. It’s just another sales gimmick, and does not change in any manner the fact that they are, in Dave’s words, the payday lender of the middle class. in short, they still have all of their inherent flaws and should be avoided at all costs.