Haris Ashley
Financial expert Dave Ramsey has shared his thoughts on supplemental insurance, advising caution against gimmicks and unnecessary coverage. Ramsey recommends careful selection and considering overall financial planning. He suggests that good medical insurance and a fully funded emergency fund eliminate the need for supplemental insurance for short-term medical issues. Ramsey advocates for long-term disability insurance and term life insurance, which he considers a major category. He discourages cancer insurance and short-term disability insurance, emphasizing the importance of emergency funds. Ramsey also highlights the importance of adequate coverage, recommending insurance worth 10–12 times one's annual income. He suggests avoiding supplemental life insurance through employers, as it may not be portable and recommends term life insurance through independent agents.
| Characteristics | Values |
|---|---|
| Supplemental insurance worth considering | Long-term disability insurance, long-term care insurance for those over 60 |
| Supplemental insurance not worth considering | Cancer insurance, short-term disability insurance, accidental death insurance, life insurance for children |
| General advice | Select carefully, think about overall financial planning, self-insure, ensure major insurance areas are covered, buy a policy before age 60, shop around, take higher liability limits on home and auto policies, compare higher deductibles on home and auto policies, combine home and auto coverage with one company |
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What You'll Learn
Dave Ramsey recommends term life insurance over whole life insurance
Financial expert Dave Ramsey recommends term life insurance over whole life insurance. He argues that term insurance is more affordable and straightforward. Ramsey's preference for term life insurance stems from its lower cost compared to whole life insurance. He believes the savings from choosing term insurance can be better invested elsewhere. Term life insurance is also a more popular option for those who get life insurance later in life, as it is more affordable.
Ramsey criticizes whole life insurance for its higher premiums, complexity, and the mixing of investment with insurance, which he views as inefficient. Whole life insurance includes a built-in savings plan, but the fees are high, and the returns are historically subpar. Ramsey considers it to be the worst insurance product available.
Instead, Ramsey recommends getting a term life insurance policy worth 10-12 times your annual income on a 15- to 20-year term. He emphasizes that the most important thing is to get coverage, as life insurance protects your family's future and provides peace of mind. Without coverage, your family will inherit debts, mortgage bills, and final expenses. A life insurance policy can also replace your income and fund things like your children's college tuition.
Ramsey suggests buying term life insurance as soon as possible because the premiums only increase with age. He also recommends that both spouses in a marriage have term life policies, especially if one is a stay-at-home parent. Overall, Ramsey's philosophy emphasizes safeguarding your family's future in the most economically sound way, which typically translates to opting for term life insurance and investing the savings wisely.
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Supplemental life insurance is not always portable
According to financial expert Dave Ramsey, some supplemental insurance is good, but most of it is not. He advises against cancer insurance and short-term disability insurance, for example, believing that your medical insurance should cover cancer treatment and that you should have an emergency fund for short-term disabilities. However, he recommends long-term disability insurance and certain Aflac products.
Supplemental life insurance is an additional layer of financial protection for your dependents, addressing specific financial needs. It is often purchased on top of a basic employer-provided life insurance policy, which is usually one to two times your salary. While these supplemental policies can be valuable, they are typically not portable, meaning you cannot take them with you when you leave your job. This is an important consideration when deciding whether to purchase supplemental life insurance.
Most employer-sponsored supplemental life insurance policies are non-portable. When you leave your job, you will likely lose your supplemental coverage. This means that if you change jobs frequently, you may need to reapply for new coverage each time, and the terms of your new insurance will depend on your current age and health status.
However, some companies may allow you to continue coverage by purchasing the group insurance after you leave. It is important to speak with your human resources department to understand the specific portability options of your policy. Additionally, you may want to consider purchasing a separate life insurance policy independent of your employer, which would provide you with consistent coverage regardless of your employer.
While non-portable insurance is not ideal, it is also not necessarily a deal-breaker. If you are young and single with no dependents, employer-provided coverage of one to two times your salary may be sufficient. However, if you have young children or other dependents, a mortgage, or other debts, then this amount is likely insufficient. In such cases, supplemental insurance can help fill the gap in coverage.
In conclusion, while supplemental life insurance can provide valuable additional coverage, it is important to be aware that it is often non-portable. This means that you may need to consider alternative coverage options if you plan to change jobs or want consistent coverage over time.
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Dave Ramsey advises against buying life insurance for children
Financial expert Dave Ramsey advises against buying life insurance for children. He believes that most of the reasons marketed by insurers are mere hype, and that there is "no financial advantage" to doing so. The primary reason people buy insurance coverage is to protect those who depend on their income, but most children do not have an income, and parents typically do not rely on their child's income to cover the bills.
Ramsey points out that life insurance policies for children are often marketed as a way to help parents cover funeral costs, which are expensive. However, he suggests that the likelihood of this becoming necessary is very low. Instead of paying life insurance premiums, Ramsey recommends that parents put money into a savings account that can be used for burial expenses if needed, but can also be used for other purposes.
Another common reason people buy life insurance for their children is to save for their education or to ensure they can get coverage later. Ramsey suggests that there are other, better methods of saving for college, such as an Education Savings Account (ESA). He also indicates that the coverage limits on policies sold to children are often too low to provide much protection, and children usually cannot add much to them once they reach adulthood.
Overall, Ramsey believes that life insurance for children is an unnecessary cost with no real benefits. He recommends that parents focus on ensuring they have sufficient term life insurance coverage on their own lives to protect their children in the event of an untimely passing.
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Long-term disability insurance is recommended by Dave Ramsey
Financial expert and radio personality Dave Ramsey recommends long-term disability insurance as an essential form of financial protection. He categorises it as one of the insurance products that people shouldn't go without. According to Ramsey, everyone should get disability insurance, regardless of their job. However, he advises against purchasing coverage that one cannot afford.
Ramsey suggests getting coverage equivalent to 60-70% of one's monthly income. He also recommends choosing the longest elimination period that one's emergency fund and budget can handle. He suggests a benefit period of up to age 65 or more if one can afford it, but a 5-year benefit period as the minimum.
Long-term disability insurance covers some of one's income if something happens that prevents them from working due to illness or injury. The younger and healthier one is, the easier it is to qualify for a policy. As one ages, premiums increase, and if one's health declines, it may become challenging to qualify for an affordable policy.
Ramsey also highlights that long-term disability insurance is different from long-term care insurance. While disability insurance covers lost income due to injury or illness, long-term care insurance covers home health care, nursing homes, and other services for older adults.
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Dave Ramsey suggests buying insurance before age 60
Dave Ramsey is a financial expert who shares advice for people struggling with their finances. He has some strong opinions on insurance and how it fits into a solid financial plan.
Firstly, Ramsey recommends buying insurance before the age of 60. This is because, statistically, the need for care before this age is usually minimal or short-term. After 60, the risk of health issues increases, which will also increase the cost of insurance. Therefore, it is a good idea to lock in a good rate before this age.
Ramsey suggests that people should not buy life insurance through their employer. Instead, he recommends buying term life insurance through an independent insurance agent outside of work. This will save on premiums and will stay with the policyholder through different jobs. He also recommends getting long-term disability insurance to cover lost income if the policyholder becomes injured or disabled.
Ramsey also advises against cash value life insurance, calling it the "worst insurance product available". The fees are high, and the returns are historically poor. He also warns against supplemental life insurance, which is often not portable and could disappear when the policyholder changes jobs. Instead, he recommends term life coverage that is locked in for the life of the policy.
In addition, Ramsey does not believe in buying life insurance for children. He argues that children do not usually have any income to replace, and that parents should instead ensure they have their own term life insurance to replace their income if they die. He also does not recommend accidental death insurance, arguing that the family's financial needs are the same regardless of how the policyholder dies.
Finally, Ramsey suggests getting a term life insurance policy that is 10-12 times the policyholder's annual income, for a term of 15-20 years.
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Frequently asked questions
Dave Ramsey believes that some supplemental insurance is good, but most of it is unnecessary. He advises against cancer insurance and short-term disability insurance, suggesting that people should rely on their health insurance and emergency funds instead. He recommends long-term disability insurance and advises against accidental death insurance.
Dave Ramsey considers life insurance for children to be an emotional sales gimmick. He argues that children typically don't have any income to replace, and that parents should instead ensure they have adequate term life insurance to protect their families.
Dave Ramsey recommends buying term life insurance worth 10 to 12 times your annual income, with a duration of 15 to 20 years. He suggests that people should buy life insurance before turning 60, as health issues that develop later in life can increase costs or make someone ineligible for coverage.
Dave Ramsey suggests shopping around for insurance plans instead of accepting the first offer. He recommends Zander Insurance as a trustworthy company that won't overload customers with unnecessary supplements. He also advises combining home and auto coverage with the same company to receive discounts and choosing higher liability limits for added protection at a low cost.
