If I put my money in mutual funds and the market tanks, what do I do then at 57. I do not disagree but mutual funds are some of the most volatile investment vehicles available.

Darrell Powell March 16 2010 10:25 PM

Dave I couldn't agree with you more. I am a fee only financial planner and I have never seen a need for whole life. There is a lack of knowledge out there about investing and insurance is not an investment. I know of insurance brokers that don't even advise buying whole life. If someone is asking you to buy whole life ask them what else they are licensed to sell and 99% of the time they can't sell other securities. I can put my clients in whole life and variable products but I would never do that to them! Thanks for the informative and consumer friendly site. Bob

Bob March 04 2010 3:16 PM

My good friend H.K. purchased a term policy some years ago when his kids (and he too) were younger. As Dave advises,he planned to invest the difference,but like most people I know,he didn't. Life got in the way and also his earnings did not increase as much as he expected. The initial term ran out,and while the policy was renewable year to year,wow,you would not beleive how much the rate increased each year! He continued to renew for a few (3yrs I think),but then dropped itbecause the cost got out of hand,so now, no life insurance! He recently contacted several agents to try to get a new policy,but his age isn't what it used to be,his health definitely isn't and approximately 20 insurance companies flat out declined him,and the one company that would cover him was charging a very high premium rate for the maximum they would insure him for,which was only one fortieth,yes that's 1-40th of what he had. Now he says he wishes he had gotten a whole life policy years ago when the premium WAS more than the term policy... BUT NOT a lot more. I know this story well,to my shame I'm the agent who he got the term policy from. I should have been more persuasive in presenting what was a very well valued whole life policy at the time,but i left the choice entirely with him. What do you think ?

Jim Mc March 01 2010 9:57 PM

My father bought a whole life policy and it was the best investment he ever made! It has had an average rate of return of 6%/yr. AND it doesnt go down in value. I just used some to buy my first home.

Ryan February 23 2010 3:27 PM

Dave does not account for what can be done with paid-up additions in whole life insurance. Buy term to protect against premature death to cover mortgage, raising kids, and replacing income, but bank on yourself with WL insurance and paid-up additions. The best plan, in my opinion, is a mix of both. That way, when your term MAY expire someday, you have permanent coverage nobody can take from you (especially when you probably need it the most in later years!) With WL, one creates an immediate emergency fund (with guarantees and possible dividend accumulation), tax deferred growth,a TAX free death benefit, and yes, one can use living benefits of life insurance to supplement their retirement with tax free money. Perhaps after they have used the money once for their kid's college education, and paid themselves back via a loan from their own cash value. Dave does not account for outstanding life companies like Country Life Ins Co. Permanent life insurance from a strong company can create wealth over 30+ years with guaranteed values. If everyone believed in a whole life insurance concept within their portfolio, our society would probably be a little better off...

Jeff February 20 2010 2:11 PM

We bought a $100,00 whole life insurance policy in 1993 which has a projectd Termination age of 64 and has a fund value of $5,241.20 and cost $36.25 a month for my husband who is now 45. We also bought a $119,595 policy with a projected termination age of 65, has a current fund value of $8,055.51 and costs $47 a month. My question is what do we do now? Should we cancel the policy which doesn't even cover us until death and use the fund values to pay down debt and get term insurance? Or should we hold on to it and try to get somethig else to cover us until death?

Jan February 08 2010 12:49 PM

I am 39 years old and my husband is 49. We have 3 children and live pay check to pay check. We have no savings. I pray that nothing happens but my husband is the sole provider for the family, what kind of life insurance do I need in case something were to happen to him and me jobless?

Kelly Barnes February 08 2010 5:46 AM

I have a brother that is 19 months older than I. But He is homeless at this by his choice in another state. Would it be legal for me to buy Life Insurance in his name with me as the beneficiary. Basically to cover death issues if it happens??? I don't have power of attorney or anything. Also I don't know if he has any type of will made or not. I would think not at this time!

Josie Hayes February 04 2010 3:37 PM

My husband is 68 and in poor health.Is it still to late to buy life insurance.And if it is not,where do we get it?

Doni Healy February 02 2010 2:53 PM

Do I have enough, or maybe too much life insurance? I'm 48, recently married for the first time. My wife is 36, and we are trying to have a baby. Only one other child, my stepdaughter, who is 11 and we are raising her. I signed up for 25 year term-level insurance from USAA of half a million (about 5 times my pay). I checked on 10 times my pay, but even though healthy and nonsmoker, at my age it gets VERY expensive for 25 year. I'm thinking maybe I should have gone with 15 to 20 year term since that is what I hear Dave say, and the premiums would be more affordable. Some stats: our house is paid for, and we have no other debts. We are looking good as far as retirement benefits, 401K, college savings, mutual funds investments.

David February 02 2010 1:32 PM

But after the term policy runs out and you have out lived it and you have all of this wealth then how does your spouse pay the estate taxes when you die? We dont live in a black and white or utopia society.

Dewayne February 02 2010 10:02 AM

40yr male buys WL policy 10.000 has policy 42 years now hes 82 intrest is about 20,000 paid in 300.00per year If he dies tomorrow what will his wife receive as sole ben

james January 26 2010 8:44 PM

I have a very big concern - I used to own a Cash Value Life Policy. I listened to Dave Ramsey's advice and I went out and cancelled my life policy and I bought a lot of Term Insurance. A few years before my policy was about to expire, I discovered I have cancer. I was told that it I have my old Cash Value policy, my cancer condition would be covered. However , my term is expired and now I am uninsurable. No Insurance company will sell me a policy. My savings went from over $750,000, but is now worth $305,000 because of the market returns that Ramsey said would be worth lots more. There is no way that amount covers my needs, especially now that I will pass away soon. What is your advice about how my plan worked out?

Clayton January 25 2010 6:27 PM

I have read thru all the replies and comments. People!!! When Dave was saying buy term insurance and invest the different. He doesn't mean to ask you to buy the insurance and then invest your money into a short term investiment(Day trading). You actrually should do it as a long term investment as in a UL or WL, you going to pay it for a long time anyways. In order to see the actrual differences, you have to be able to leave the money in the market for it to grow. S & P did lose 35% in the last couple years, but actrually gain somewat around 10% over the last 10years. If you even have some sense on investment, you wouldn't even post something about short term lost as anything short term has risk. Also, soemone claiming paying double for 15-25 years on term insurance and would get all money you paid if you don't die. I think this apply to some of the WL and UL also that has this feature in them. However,think twice before you do so, the only reason why any insurance company willing to give you back the money is because they used your extra cash to invest in the very same market.The 10 to 20 years would give them enough time to balance out the risk to get their 12%-19% Rate of return to cover their cost. otherwise, how can the insurance company get their money?I don't think any of them are out there try to make the poor people's life better.NO!!! They are out there try to make money off us. And last, tax issue, in Canada where I live, we got many option to offset this such as RRSP/Tax free saving account which can do the same thing as UL. RRSP let u lower your tax bracket and get the tax back and TFSA let you invest and not getting tax on the gain.

Frank January 22 2010 11:01 AM

Has anyone hear of or been exposed to indexed universal life isurance?

Phillip January 21 2010 10:12 PM

Being a recent graduate of FPU,I began shopping for term only. Having sold W/L and U/L for a large insurance company, I have both presently. In my post FPU search I have been made aware of a product called "Indexed Universal Life". It was presented in a manner that was tax free as not only a deat benefit but also retirement income (also tax free) in the golden years. The "Indexing" concept was explained in that I would be guaranteed a rate (presently between 8 and 12 %), if the market ever dropped below this stated rate, my growth would go flat and remain at the stated rate. No up side benefit but down side protection, as well as all growth would be tax free. Does this sound feasible? Has anyone else been exposed to such a product? Please respond!!!

Phillip Byrd January 20 2010 9:40 PM

If someone has me named as the beneficiary on their life insurance, will the company make it more difficult to collect since we're not married?

maia January 17 2010 10:44 PM

My husband and I bought our fourth and final home 8 months ago and i have been seeking insurance to cover the mortage incase something was to happen to him . He works and I dont but the big prob here is that 2 1/2 years ago he had trouble with depression and was admitted to the VA hosp for 72 hrs observation for sucicide and we have been turned down for term life insurance because of this and even tho he is doing great now and takes a few meds it is still a prob getting insurance . If we dont get declined then the monthly premium is not afforable ! Any advice ?? My fear is something happening to him and being stuck with a 200.000 dollar house that i caint pay the mortage on and them forcloseing before i would have a chance to sell and my credit being reuined ! Any advice would be grateful !

Denise January 14 2010 12:22 PM

We started the debt snowball on the first. We dwindled our savings down to the thousand that Dave says to do. Cut up all credit cards and jumped on board to get things paid off. Then....last Saturday my father passed away. He left all funeral expenses to my sister and I. So here we are facing not only the expense of making the 500 mile trip but trying to come up with $2700.00 fory share of the expense! So here I go... Hoping to qualify for another loan. I regret using my savings! His program has some areas that each person needs to decide if it is best for their situation to only have $1000.00 left in savings!

Karen January 13 2010 5:42 AM

Many people are a TERM candidate and others are WL candidates. The only way of knowing who won the argument is by forwarding life 30 years. And if we do, we will notice that we all had a very different outcome than we think today. Buying WL doesn't mean "Do not invest". And those who are on the "buy term and invest the difference" boat... tell me where to invest??! I have never seen a person who has actually said where they are putting the difference. I know: They don't, they spend it, or they do it for 3 months and forget about it and 7 years later the WL person is ahead of the game. WL is a long term project; don't buy it for less than 20 years. TERM is great, but depending on the state that you live it might expire as early as 80 or after 60 it is too expensive to maintain. I own both, and I also invest in a retirement plan, a stock portfolio and real estate (a little apt I own and live in), I know that if I continue in this path I will be financially secure and not because of WL or TERM, but because I made a plan and I followed it.

finadviserNY January 11 2010 6:27 PM

Dave, No two life policies are the same. Assumptions that are made in your example do not take into account the taxes charged to the mutual fund. Nor do they account for down turns in the economy. You do not account for the use of paid up additions in whole life insurance. Life insurance is really no different than any other product. If you want to own your policy( just like owning a home or a car) there is a price associated with doing that. If you don't want to own it, rent. Or in insurance terms, get a term policy.

Rob January 11 2010 9:53 AM

We purchased a WL policy many years ago. I was educated the same way to buy cheap term ins. for insurance and invest the difference for growth. But we realized it was almost futile to chase interest rates when you end up paying a majority of it back in taxes. You may obtain a lead but it can be an awful ride and stressful. And estate taxes are the worst, they're the biggest money maker for the government. So to mitigate that, we bought WL. Didn't pay anything out of pocket, only transferred existing assets annually into it. Paid $30k annual for 13 years and had a cash value about $500k using PUA's (Paid Up Additions to multiply the dividends paid). After that it was self sustaining and we are withdrawing $31000 a year till age 95 to use how we like tax free. Whenever I die, hopefully in my 80's or later, there will still be $220-300k or more left in there to pass on tax free. And with this, I don't get just the policy amount, I get every dollar in it. It contractually accrues dividends every year at a guaranteed rate but has always done better and the past 2 years has matched or outperformed other "safe" investments. You can't always count on what rate your other investment types will give you but with this you always know. I don't have to fret over my investment performance and how AIG or anyone else tanked my principal and growth or how it's going to be taxed away with little to show for it in the end and to pass on. But not every WL policy performs like this. It must be a dividend-paying whole life "non-direct recognition" policy and only a few insurance companies provide it or have agents that know what it is and whether they offer it. Dividends on this are paid on the policy amount NOT just the cash value. Once the dividends are paid, they are permanently added to your asset base and cannot be taken away. Still don't think of it as an investment vehicle. You probably should still take advantage of 401k/403b employer matching investments and Roth IRA's, etc. But I want to mitigate taxes. I hate them. You're not just in the calculated tax bracket based on income you know. That may tell me I'm in a 25% bracket but add in state, city and even county sales taxes, federal excise taxes on your landline or cell phone, federal and state gasoline taxes, utility taxes, license plate taxes, property taxes, states that have income taxes and on and on and you're more likely in the 40-50% or more tax bracket. And I want the easiest access to every dollar I need, enable me to provide my own financing, and pay the least amount of tax and pass on the most possible. There!

Gadzooks January 09 2010 2:21 AM

I don't fully agree with this generalization for a myriad of reasons. First, okay, I understand the argument that term is cheaper...I got it. But term insurance is also somewhat of a scam. You're most likely not going to die within your term age and as an industry professional, I am constantly dealing with people in their 60's (my father included) who bought term insurance thinking: the house will be paid off, debt will be down, the kids will be out of the house and WE WON'T NEED THE INSURANCE - and they were dead wrong, they still need the insurance for their family. BUT, unlike whole life insurance, which you can actually stop paying after some years and the premiums are level- term insurance premiums go through the roof after their term ends and it becomes too expensive to afford for most people, that's where the scam aspect comes in (you're paying for something you won't use)! How is that good advice? Even the best plans fail and people's financial situations change, come on look at the market the last 2 years... I don't look at Life Insurance as an investment, or a savings account, and you never should, it's insurance. However, you can look at it almost like the fixed income portion of your portfolio; but, unlike a muni bond or a cd, whole life insurance has a big death benefit attached to it (that's called leveraging a dollar folks) that your loved ones can use tax free! My suggestion to most everyone is to have some permanent insurance in their planning - if for no other reason than out of respect for your survivors to pay for burial costs. Unfortunately for everyone reading this ALL LIFE INSURANCE has been grossly mis-sold for many years. If you have a good advisor they will work with you to build a plan that makes sense for you and your family for many years to come. . For the consumers out there, before you buy, get advice from older people about what they wished they did, not your peers because they can't see the future.

Tim Power January 08 2010 3:04 PM

Dave, I read your article, I liked it. I have always figured the economy to be broken into 3 areas: Banks, Investments, and Life Insurance. Banks back mortgages, investment companies offer you the ability to participate in the common market, and Life Insurance companies let you take part of life insurance and annuities. I know there are a lot of cross overs, but i always preferred this simplistic model, also the institutions that do just one of these 3 are the tops in each area respectively, "they each know a lot about a little" which I always thought was best. Since the inception of this country all 3 of these general areas/instituions have existed in some form. Now here we are in 2009, almost 10, and the government is bailing out 2 of the 3 sectors of our economy, Banks and Wall Street. However, I found out that the government has solicited advice on how to run a successful business from 3 of the top mutual based life insurance companies. In other words the Fed is ASKING for help from the Life companies and bailing out the banks and investments. So I looked up a couple of whole life policies and found an average rate of return of 5.5% tax free in just cash value alone, disregarding death benefit over almost every 25 yr segment of history since the 1800s. I'm confused, please help! All the best and happy new year. Rick

Rick December 28 2009 4:01 PM

How can I find out if someone has an insurance policy on me?

Lauveta Green December 19 2009 7:24 PM

I have mentioned this on another board, but here it goes again... This article fails to mention the third, and better, life insurance option - a return of premium term life insurance policy. With this type of policy, you will pay about double the premium of a standard term policy, but still a fraction of the premium of a whole life policy. The full death benefit applies throughout the term, but at the end of the term, all of your premiums are returned. The amount is not taxable. Example: I purchase a 20 year term policy w/ a $100,000.00 death benefit at about $13.00/month - my family receives $100,000.00 at my death, but I receive nothing should I survive the 20 years, although I will have paid out $3,120 in premiums. However, if I purchase a return of premium 20 year term policy w/ a $100,000 death benefit at about $26.00/month - my family receives $100,000 upon my death, or I survive the 20 year term and receive the full amount of premiums I have paid $6,240.00. You get the same coverage, albeit for a slightly higher premium, but in the long run, this is at no cost to you.

Jessica December 16 2009 2:43 PM

As a young couple, my husband and I went without life insurance for many years. When we turned 35, it occurred to me that if something were to happen to him I would not be able to support myself or put my children through college, so upon hearing one of Dave's informercials on Zander Insurance - I called and was able to purchase a 20 year term policy for $500K for only $255 a year. A million dollar policy would have only been a little over $400 a year, but my husband said I would try to kill him for THAT much - so we settled for the half million. I have since slept much better, knowing if something happens my girls and I will be just fine. Buy TERM and do it as early as you can, as it is much more affordable when you are young. No one can afford to go without insurance, and there is no better investment than to protect one's family...

Shayne December 15 2009 9:52 PM

Are you kidding me!? My WHOLE life insurance policy has paid for itself....My cash value is worth more than I paid, and I no longer have to pay premiums. Cash value life insurance is a great product because it forces you to save. How many people in DEBT actually have good spending habits?? This is a way to force you to save, btw taking out cash from your policy is not that hard at all. Cash value life insurance is a good conservative part to everyones portfolio.

jason December 15 2009 10:07 AM

Why would anyone want to buy Term and invest the difference. The S&P lost over 35% last year in 2008. So why would I want to lose that kind of money. I can get a guaranteed insurance product of 1% when the market is down and this product mires the S&P 500 index

alex salas December 15 2009 8:55 AM

My grandfather bought a policy out for me when I was about a year old. Now it is time for me to take over the policy. However it is whole life insurance. The person that the policy was purchased from continues to tell me that whole life is better in the long run. The policies death benefit is 52,000. The agent keeps telling me to not touch it or do anything with changing the policy. What are my options? Could I put this money into an an investment instead? Should I stick with my whole life or switch to term, considering I have had the policy out on me for so long?

Ashleigh December 14 2009 4:19 PM

I have a universal life policy that I started 10 years ago. I took out a $3000 loan against it 6 years ago and now I owe $6300. The cash surrender is $3500, cash value $10200. The agent said I can can do a payoff that will reduce the value. I'm just trying to find the best way to get out of this. I already have a term set up. Any advice?

tom December 14 2009 3:43 PM

What about the tax implications for your heirs. Doesn't LI provide a better means of passing wealth to your children. I am fearful of our govt increasing the estate tax in the future. If the estate tax is 50%, is it better to invest the money on your own, or in a LI policy?

Lp December 14 2009 2:38 AM

I hear the arguments about what type of insurance to buy all the time. In my opinion no insurance policy is bad or good. You just have to apply them in the correct manner. Term doesn't fit every situation neither does whole or universal life. All these products have a purpose. Buying term and investing the differnece is a great strategy. But everybody doesn't want to become an investor. Some people prefer gaureentess over the risk of loosing. So this should be an indivitual thing. Not one size fits all approach

Clarence December 12 2009 8:02 AM

term life makes more sense for the person that has a plan or should I say goals in life

Robert December 10 2009 8:56 PM

I need help concerning purchasing life insurance for a irresponsible 40 yr old brother. He doesn't think he needs it right now because he can't afford it. If he dies, I'm the only one who could afford to do anything but I don't want to have to take away from my family to bury him because he's too irresponsible to take it out. Should I just get a pre-arranged funeral since I think I can do that without his knowledge? I asked him if I could take out life insurance on him at my expense and he still said he'd take care of it later. What to do?

1singingbryant December 08 2009 5:31 PM

Kim, you're right in saying the odds are against anything happening to either of you. But what if it does? Do you have $10,000 in cash to pay for final expenses? If you are struggling to make it on two incomes how would you make on one? Do you have car insurance because you PLAN to get in an accident? I know it's the law in most states, but would you cancel that if it wasn't? Find the least expensive 20yr.term policy, get enough coverage to at least pay for the debt(including the mortgage) and final expenses.

John D. December 03 2009 12:32 PM

Ok, now I maybe need to rethink our policies? Confused; I'll have to look further into ehat we have. Regardless, We are working on paying down our debt, which is a lot. Honestly, we are struggling right now and learning to do without. So my quiestion is, do we ditch our life insurance policies while we are paying off debt to pay oiff faster? If we are struggling to pay bills each month, is it worth having life insurance? These policies were just set up this year, so waiting another year or two can't make the premiums that much more each month, can it? And really, I know anything is possible, but what is the liklihood of something happening? Also, my thinking is what good is it to prepare so much for a life where my husband or myself dies, if we cannot take care of ourselves when we are living? Would it not be better to get out of debt and then buy life insurance?

Kim November 30 2009 11:46 PM

My firm has very independently specialized in term life insurance for 39 years. You provide great financial advice and I work with a number of your clients. Keep up the good work! Your statement about Cash Value Life insurance is very good general advice. It would be nice if everything were that simple. It may be true in some or even many cases, but it is certainly not true in all cases. For example, given the right company, the right Universal Life (other types purposely excluded) policy, the right funding (maximum works best), and a high marginal tax bracket, a Universal Life policy can safely outperform all comparable investment alternatives (Life insurance is not considered an investment). I and some of my clients have done it, and will continue to do it.

Robert J. Moody November 24 2009 5:54 PM

I purchased a Whole Life policy ($58K death benefit) from myself back in 1989. I was an agent at the #1 insurance company at the time. I put in $50 a month for 19 years, for a total of around $11,400. When I wised up and replaced my Whole Life (investment) insurance with straight Term, I cashed it out. The cash value was around $12,000 - a net return of SQUAT! Now I have $750,000 of death benefit for $70 a month, and invest $500 a month into a Roth IRA.

Gary Hale October 29 2009 2:07 PM

I got suckered into buying a whole life policy when I was young and stupid. Buy term. Insurance is not an investment.

Mike Lindblom September 16 2009 4:33 PM