Life Insurance Is NOT an Investment - Dave Ramsey Rant

Summary

In the video script, a caller named Brittany discusses her concerns about purchasing permanent life insurance instead of term insurance for her wedding. The host, Dave Ramsey, emphasizes his stance against using life insurance as an investment, advocating for term life insurance and investing in mutual funds instead. He criticizes the financial advisor who sold Brittany the policy, suggesting that the advisor was more interested in sales than in providing sound financial advice. Ramsey recommends comparing term life insurance rates on Zander Insurance's website to find better deals and stresses the importance of using brokers to shop around for the best insurance rates.

Takeaways

• 📝 The caller, Brittany, and her husband purchased permanent life insurance without fully understanding it and are now considering switching to term life insurance.
• 💡 Dave Ramsey emphasizes that life insurance should not be used as an investment vehicle, as it typically offers poor rates of return and high fees.
• 🗣️ Ramsey criticizes the caller's financial advisor for potentially misleading them about the nature of whole life insurance, suggesting the advisor may be more of a life insurance salesman.
• 🤔 Ramsey suggests that the caller's financial advisor may be ignorant or dishonest about Dave Ramsey's stance on life insurance as an investment.
• 💼 Ramsey advises the caller to find a new financial advisor who understands the principles he teaches, particularly about not using life insurance for investment purposes.
• 💰 The caller is considering switching to a 400,000 term life insurance policy for each spouse and investing the money saved into an IRA and mutual funds.
• 📈 Ramsey highlights that mutual funds can offer higher returns than the investment component of permanent life insurance policies.
• 📊 Ramsey recommends using a broker to shop around for the best insurance rates, rather than going through a captive agent who represents only one company.
• 🏦 He also mentions that he personally uses Zander Insurance and endorses them because they offer a quick and easy way to get competitive term life insurance quotes without selling customer information.
• 🚫 Ramsey has consistently warned against the pitfalls of whole life, permanent life, and investment-based life insurance for over 25 years.
• 👉 Ramsey encourages listeners to get term life insurance, which is more affordable and should be purchased through a broker to ensure the best deal.

Q & A

What is the main concern of the caller, Brittany, regarding her life insurance policy?

Brittany is concerned about the type of life insurance policy she and her husband purchased. They bought a permanent life insurance policy but later learned from a financial advisor that term life insurance might be a better option. She is seeking advice on whether to keep the permanent policy or switch to term life insurance.

What is the opinion of Dave Ramsey on using life insurance as an investment vehicle?

Dave Ramsey strongly advises against using life insurance as an investment vehicle. He believes it is not a good rate of return on investment and that people should instead invest in mutual funds for potentially higher returns.

What does Dave Ramsey suggest is the best way to purchase life insurance?

Dave Ramsey suggests purchasing life insurance through a broker that shops several companies to get the best possible deal, specifically recommending term life insurance for 15 to 20 years, which is about 10 to 12 times the income of the insured.

What is the difference between term life insurance and permanent life insurance according to the script?

Term life insurance provides coverage for a specific period and does not have a cash value component. Permanent life insurance, on the other hand, has an investment component and a cash value that grows over time, but it often comes with higher premiums and fees.

Why does Dave Ramsey consider investment-based life insurance to be a bad investment?

Dave Ramsey considers investment-based life insurance to be a bad investment because the fees associated with these policies can be very high, especially in the initial years, and the rate of return on the investment component is typically low compared to other investment options like mutual funds.

What does Dave Ramsey advise regarding the use of a financial advisor?

Dave Ramsey advises caution when choosing a financial advisor. He suggests that the person should be a life insurance salesman rather than a true financial advisor if they are pushing investment-based life insurance policies.

What is the role of Zander Insurance in Dave Ramsey's recommendations?

Zander Insurance is endorsed by Dave Ramsey for its system of getting the best possible price on term life insurance. He personally uses Zander Insurance for his own life insurance needs and appreciates that they do not sell customer information to third parties.

What is the recommendation for the amount of life insurance coverage one should have?

The recommendation is to have term life insurance coverage that is about 10 to 12 times the insured's income.

What is the issue with the life insurance policy Brittany purchased according to Dave Ramsey?

The issue is that Brittany purchased a permanent life insurance policy, which Dave Ramsey advises against due to its investment component being a poor financial decision compared to term life insurance.

What should Brittany do with the money she was paying for her permanent life insurance policy?

Brittany should consider switching to term life insurance, which is less expensive, and invest the difference in an IRA or mutual funds for a potentially better return.

Why does Dave Ramsey emphasize shopping around for insurance policies?

Shopping around allows consumers to compare policies from different companies and find the best deal, which can save them significant money over time.

What does Dave Ramsey suggest about the relationship between insurance agents and their customers?

He suggests that captive agents, who can only sell insurance for one company, may not always offer the best deal. Instead, using a broker who can shop around among several companies can result in better pricing for the customer.