November 23, 2022
  • November 23, 2022

Why financial guru Dave Ramsey favors the term

By on October 18, 2022 0

There has been an ongoing debate about whether type of life insurance has more value compared to the average term life insurance or whole life insurance. Financial guru Dave Ramsey is solidly behind term life insurance policies. In fact, he hates whole life policies and wouldn’t recommend them under any conditions.

Ramsey is a personal finance personality, radio show host, author, and businessman. He hosts the nationally broadcast radio show “The Ramsey Show”. He has written several books, including the New York Times bestseller “The Total Money Makeover,” and hosted a television show on Fox Business from 2007 to 2010.

Whole life insurance provides permanent coverage in the event of death for the life of the insured. Whole life insurance has a cash savings component, which the policyholder can withdraw or borrow, depending on Investopedia.

Term life insurance, also known as pure life insurance, is a type of death benefit that pays the policyholder’s heirs for a set period of time.

Once the term expires, the policy holder can either renew it for another term, convert the policy to permanent coverage, or let the term life insurance policy expire.

Under term life insurance, there is a guarantee of payment of a declared death benefit to the beneficiaries of the insured if the insured dies during a specified period, Investopedia reported. These policies offer no value other than the guaranteed death benefit and do not include a savings component.

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Temporary life is preferred by Ramsey.

According to Ramsey websiteWhole life insurance is a scam!Ramsey said whole life often costs hundreds of dollars more per month and includes a “savings” plan with terrible returns.

Ramsey also explained on his website the difference between term and whole life insurance policies.

“We’ll give it to you straight—term life insurance works, while all the life fails,” the site said.

With term life, there is a fixed premium that stays the same for the life of the policy and only lasts a set number of years. Whole life, on the other hand, offers premiums that can vary, the site explains.

Term life insurance provides you with life insurance coverage for a fixed term. If you purchase a 20-year policy, you are covered for 20 years. Now, if you die during those 20 years, your beneficiaries receive a life insurance benefit. The Ramsey website gives the example of a $300,000 policy for a 20 year term with one death within those 20 years, your beneficiaries would receive $300,000.

For whole life policyholders, if you die before the policy matures, your cash value disappears. “If you haven’t done anything with that monetary value in your lifetime, guess what? The insurance company keeps it! Your family receives the death benefit and the insurance company takes over your cash value account. (This is one of the worst things about cash value life insurance and that’s why we’re going to still tell you to walk away from it.),” Ramsey wrote of the website.

During an episode of his “The Ramsey Show” titled “Heated debate between Whole Life Agent and Dave Ramsey,Ramsey takes a call from a listener who is a whole life insurance agent. A heated argument ensues between the two.

After the caller gave his reasons why whole life is a better option, Ramsey replied, “You can never convince me there’s a good time to use a credit card. They suck, they are not good products. You can say the same for your whole life insurance policy.

He continued, “It’s a horrible product. You pay 20 times more than the value of the policy and when you die the company only pays the face value.

On another episode of the show, this one titled “Is whole life insurance still a good idea?” he is asked if there is ever a case where whole life would be the preferred option. In short, Ramsey said “no”.

“It’s the middle class payday lender. They screwed up the middle class for decades. All independent thinkers…based on numbers and math, think whole life is a scam,” he pointed out.

The added: “The math is quite simple. (Lifetime) is 20 times more expensive. You pay $100 a month and pay for whole life for the same amount of coverage you can get for $5 a month with term life insurance. It is the same amount of insurance.

During an episode titled “Why Is Term Insurance Better Than Whole Life Insurance?” spoke with a caller who had taken out life insurance policies for his three children. Ramsey told her why it was a bad idea and how she was “scammed” by her agent.

“It’s one of the worst financial products on the market today,” he said flatly. “The car rental, the whole life insurance policy, the credit card are the three things that keep the middle class in the middle. People just get confused. When you crunch the numbers, it just drives you crazy how badly the consumer is being treated…because they’re holding you back.

He advised, “Look around and see what rich people are doing…Let’s do some rich people stuff.

Financial talk show host Dave Ramsey works at his broadcast studio in Brentwood, Tennessee, March 23, 2006. (AP Photo/Mark Humphrey)