Lately, a lot of blogs I’ve been reading have mentioned Dave Ramsey in one way or another. I’d heard the name before so one night I decided to tune into his show. I am all for being frugal and saving money, so I found some of the stuff interesting. Luckily, the only debt we have is our mortgage payment and one small car payment, so a lot of what he was talking about was not really relevant to our situation. However, one caller asked him about life insurance. He had been researching term life insurance quotes and wanted Mr. Ramsey’s advice on what to do. Now, I was always under the impression that whole life insurance is perferable to term, but in his opinion, the return you get on whole life insurance just isn’t worth the investment. I haven’t had the chance to research it further, but I probably will because I’d never heard that before. I just found that interesting.
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That’s the advice I got from my uncle, who is a CFP, as well. For younger people, term makes more sense, and you are actually more likely to need disability insurance than life insurance. A lot of brokers will try to *sell* you a whole-life policy, because they make more money on it. It’s hard to feel like you’re getting objective advice sometimes.
My understanding is that whole life is good for policies that you will keep for a very long time. Generally, term makes the most sense because it is *much* less expensive – and if you need the money because your kids are young, you probably won’t need the policy when it expires in 20 years. I’m no expert but my impression is that whole life is something to consider when you have, for example, a disabled child who will definitely need the policy when you die, no matter what their age. And, if you get your whole life policy when you’re relatively young, the premium will be considerably lower than if you started the policy when you are older. It’s definitely something to think about, but more than likely, term makes more sense than whole.