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.
The primary differences between Zander ID Theft Solutions and LifeLock are integrity, price, and a continued effort to emphasize service and value to our members.
LifeLock’s troubles with the FTC brought notoriety over the years, including fines and settlements with the FTC exceeding $100M and class-action lawsuits. Their issues initially stemmed from their claims that identity theft could be prevented – leading their members to feel a false sense of security and, later, dissatisfaction with their plan. They were criticized for not properly protecting their clients’ data and not following agreed upon guidelines based on prior settlements. In recent years, and under new ownership, these issues have mostly been resolved.
Both Zander and LifeLock offer services to help reduce your risk of becoming a victim through the use of cyber tools and monitoring services, and provide recovery and restoration of your identity if you suffer an ID theft event. However, as you look deeper, you will see that Zander’s program offers thorough protection at the lowest price, which presents the best value in the identity theft protection marketplace. When we developed this product – with Dave Ramsey’s input – we stripped away the unnecessary features that our competitors use to inflate their prices and profits and focused our efforts on the core elements that benefit our clients most without breaking the bank.
One feature we opted not to include in our ID theft protection plan is credit monitoring, and for good reason – we don’t believe that the high cost of credit monitoring is worth the minimal benefit received. Especially when, on average, less than 25% of ID theft events are related to credit fraud. Why overpay for a service that is only marginally helpful and you can complete yourself for free with the same effectiveness? The same can be said for many of the other services offered by LifeLock, such as Social Media Monitoring, Credit Scores Tracking, Sex Offender alerts, etc. Many of these features are just added to increase their product’s marketing appeal, but really offer little protection and just raise your costs. In reality, even with all your information being monitored, identity theft cannot be 100% prevented. Therefore, the most important aspect of any protection program is having a restoration and recovery team to help you clean up the mess, and stolen funds protection to reimburse you if you are affected by a hack or theft. Only LifeLock’s most expensive plan offers the financial protection of our programs.
While many of the benefits offered by each service are comparable, Zander ID Theft Solutions is more affordable than any plan offered by LifeLock, and contains more robust benefits in many areas. For instance, our family plan includes comprehensive coverage for up to 10 children to the age of 18 (LifeLock covers up to 5), and even includes limited benefits for adult dependents. LifeLock does not include children in any of their standard offerings and charges an unreasonable $819.99/year for their family plan after the first year. We believe our clients should have the most cost-effective option available so that the money they are saving can be used to attack debt and grow wealth. We do not bait our customers with introductory rates and then drive up the cost after 12 months of having your business – in fact, the price of our plan has never gone up since the program’s inception in 2008.
Overall, LifeLock’s plan may look similar to Zander’s on paper, but our pricing, our transparency, and our commitment to excellence in customer service set us apart. Our program is a balanced approach of proactive monitoring and restoration services, making Zander the smarter, more affordable solution to identity theft.
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Dave Ramsey only recommends guaranteed level term life policies since they are the most affordable and allow you to focus on more pressing financial issues. The basic premise for cash value plans (which include whole life, universal life, variable life, and return of premium plans) is to overcharge you in the early years to pay the higher costs in the later years. The premise of term life plans, on the other hand, is that you will not need life insurance for your whole life – so why pay for it? In 15-20 years, you should have enough debt paid down and savings built up to be self-insured. That means you will no longer rely on a life insurance policy, because your family will be financially secure enough to carry on after your death. That is why Dave recommends a 15-20-year plan – although you can opt for a shorter or longer term length if that works better for your specific situation. The same applies for the recommended coverage amount; Dave suggests 10-12 times your income, but if that is unattainable due to budget constraints, some is always better than none.
You can compare rates online or give us a call at 800-356-4282 for personal assistance.
We generally recommend a review of your term life insurance policy every two to three years. This does not mean changing policies or companies unless there has been a change in your underwriting eligibility (such as quitting smoking, improved health, lifestyle/avocation change, etc.). During this review, be sure to look at the ownership and beneficiary designations, along with other policy features to ensure that any changes that have occurred over the years have been addressed. Many people forget to add their newborn children to a policy, for instance, or make changes to the primary or contingent beneficiary designations once the policy is in force. Be sure that the people you want to benefit from the policy proceeds are appropriately named and that the policy reflects your current needs. Get more answers to common questions regarding term life insurance.
Unless you have enough funds to replace all your personal property (TVs, clothing, furniture, etc.) in the event of a catastrophic loss, a renters policy is advisable. Even people who have enough savings to cover these potential losses often continue to carry a renters policy since it is very affordable. These policies have similar coverage to what you would find in a homeowners policy, with the exception of the building coverage. A renters policy covers the same exposures as homeowners, which includes fire, lightning, theft, windstorm and numerous other perils.
To determine the amount of coverage you’ll need, figure out the cost of replacing all your personal items. You may want to add a little additional padding since the policies pay to replace items up to the limit you purchase. If you have any special items such as jewelry, firearms, silver, or art, many of these require a separate line of coverage. Another additional line that is typically overlooked is the personal liability protection provided as a part of the policy. This covers you for any bodily injury or property damage caused to a third party when they visit your rental residence. Just like with auto insurance, you need to carry liability limits that will protect your personal assets from lawsuits that may arise at the rental property.
The answer to this question depends on the size of your estate. If the amount of your estate, including your life insurance, does not exceed the current unified tax credit limit, then owning your own policy does not cause any federal estate tax liability. However, if your estate does exceed the unified tax credit limit, the ownership of your own policy increases the size of your estate and can raise your estate tax liability. In many cases, a spouse can act as the owner and eliminate this potential problem. Please consult with us or your legal counsel if you feel this circumstance may apply to you.
Yes! If the beneficiary listed dies prior to the insured person, even if by only a few minutes, and no contingent beneficiary has been named, the policy proceeds are paid to the insured’s estate. As previously mentioned, this can cause significant tax liability that could be avoided by the designation of a contingent beneficiary. The naming of a contingent beneficiary does not affect the payment of the policy proceeds if the primary beneficiary is still alive. The contingent beneficiary has no rights to any policy proceeds unless the primary beneficiary has predeceased the insured person. Get a free, instant term life insurance quote.
This measure should only be considered in very unusual and specific situations. By naming your estate as beneficiary, you expose the proceeds of the policy to potential state inheritance and federal estate taxes. Additionally, creditors now have access to the funds since many states protect beneficiaries such as spouses, children, siblings, etc., but not an insured’s estate. Your state of residence and personal financial situation must be considered, but naming a specific individual or organization as beneficiary will help ensure they receive the policy benefits while limiting tax liabilities. See more frequently asked term life insurance questions.
No! This is just another type of cash value life insurance policy dressed up like an investment product to try and appeal to someone’s desire to have stock market like returns without the risk typically associated with the market. Indexed universal life is just a gimmick whereby the insurance company tries to insulate you from stock market losses by offering shared investment earnings when the market is up and minimum returns when the market goes down. The policy still maintains all the same flaws of a typical cash value policy, but adds additional fees and expenses, not to mention the fact that you lose the upside of the market, which is typically much higher than the high end payment from an indexed product.
Being declined health insurance due to pre-existing conditions can be a very frustrating experience. Over the years, individual health insurance plans have become very strict about the health of the individuals that they will accept into their plan as new policyholders. If you have been declined coverage, make sure that you have researched the market thoroughly – one company’s decision does not always mean another will not consider your application. In some cases, a condition may have a “rider” or limitation for a certain condition, but a policy can still be written to cover other conditions. I If you have recently been employed at an organization with more than 20 employees, you may be eligible for COBRA, which allows you to continue your benefits after for up to 18 months (36 if disabled) after departing employment. This would allow you to continue your current plan with no interruption for pre-existing conditions.
With the recent passage of the Patient Protection and Affordable Care Act (PPACA), high-risk health insurance pools were established in every state. To qualify, you have to have been without health insurance for at least 6 months prior to enrolling Depending on the severity of the situation. this may be a way to go. The specifics of how this federal requirement is being addressed differ in each state – to learn about this option in your state, contact your state insurance department.
Dave never recommends keeping a cash value policy, regardless of how long or short you have had it, unless you are unable to qualify for a new competitively priced term life policy. However, you should never cancel an existing plan until you have received the new policy and reviewed it to make sure it meets your specific needs. Most people don’t realize there is still a cost to paid-up policies in that you are paying a higher price for the cost of insurance and administrative fees than a term life policy. That means you are receiving a poor rate of return on money that could be used to pay down debt or be invested more wisely.
The basic premise for cash value plans is that you will need life insurance your whole life (hence the name “whole life” insurance). This means that you are overcharged in the early years to cover the higher costs in the later years. Dave’s opinion is that if you buy term life insurance, you avoid this over-payment period entirely, leaving you free to use your money instead to attack debt and increase your savings. With a 15 or 20-year level term policy, you have time to reach the point in your financial journey at which you no longer need life insurance.
The cash value in your plan is available to you subject to the surrender penalties of the policy. These surrender charges decrease over each year you have had the plan and typically are gone after 10-15 years. Dave would typically recommend using the remaining cash value to intensify your debt reduction efforts, help establish your emergency fund, and take advantage of better investment options. Wherever you are in the Baby Steps is where you should focus this money. Whether your debt is related to mortgage, school, health expenses, or something else, Dave’s Baby Steps address how you should prioritize your existing savings. It just doesn’t make sense to maintain a savings plan of any kind at a poor rate of return while paying out higher expenses for credit card and other debt instead of addressing more important financial objectives. Oftentimes, companies try to dissuade you from cancelling your cash value policy by implying that you will face serious tax consequences if you do. It is uncommon for a tax to be due, however. In the rare cases when you may owe taxes, it is based only on the refund you receive that is in excess of your paid premium, although you will need to include any dividends you received during the term in addition to the cash value. Regardless of the tax situation, Dave recommends cancelling your cash value policy and opting for term life instead (but don’t cancel until your new policy is active).