Highlights from the Dave Ramsey Show

QUESTION: Tiffany on Twitter asks if it's ever too late to get life insurance. Dave explains.

ANSWER: Yeah, there are certain ages they don't want to issue life insurance because they pretty much think you've got one foot in the grave. You can pretty easily get term life insurance up until about age 70, and there are some policies available later than that depending on health and other things.

You really shouldn't need a lot of life insurance when you're 85 years old, assuming you have enough money set aside to cover burial and someone you're leaving behind is not depending on your income to eat with, like a spouse, I guess. Hopefully, you've gotten rid of your debts by then, and hopefully you've saved a lot of money by then. It's technically not ever too late, but when you get much past 70, it gets very difficult.

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QUESTION: Greg on Twitter asks why Dave personally has life insurance. The reason reaches a little deeper than money.

ANSWER: You're right. I don't have any risk, and Sharon would be just fine if I die with no life insurance. She'd be just fine. I'm self-insured. I'm not only out of debt, I also have wealth, so she could live off of our investments easily. She's just fine.

I'm 52 years old. I'm in great shape—not perfect shape but good enough that I qualify for premium rates or whatever you call them. I don't smoke. I don't jump out of perfectly good airplanes—that kind of stuff. I qualify for the best rates, in other words.

I could buy $1 million worth of 20-year term life insurance for nothing. It doesn't cost much. The only reason I buy life insurance at this time is SWI—Sharon Wants It. She would rather have a $5 million policy on me than she would another shiny rock to hang around her neck. It's a luxury item, if that makes any sense. It may not make sense to you, but it doesn't matter. It's not for you. It's for her.

It's kind of like with all the stuff Sharon has been through being my wife, if Sharon wants it, Sharon gets it. She's not real hard to please, by the way. She just likes to have some life insurance that's got her name on it in addition to the other stuff, and that makes her feel good. That's fine. I can afford it. It is a luxury item though. It's not a financial planning necessity. It's probably not even a real great use of money, but honestly, neither is purchasing diamonds. They're not a great use of money because they really don't go up in value. It's just an investment in a relationship. It's a gift. It's a shiny thing—a nice thing that somebody wanted, and that's all it is. I suppose if you want to look at it that way, purchasing a dozen red roses on Valentine's Day is not a great investment because I've seen those roses 10 days later—what they look like. You throw them away, right? They're gone. Is that a good investment? It's an investment in the relationship. It's not an investment in flowers. If you were going to do that, you'd buy a rosebush instead of cut roses. They die. They're already dead. It's just a matter of how long it's going to take for them to wither.

That's the category life insurance is in for me, but it is a legitimate question on your part. You become self-insured by becoming debt-free and having some money. Let's say the typical family is 52 years old, the kids are grown and gone, and the typical family maybe has $500,000, $750,000, or $1 million in mutual funds. The husband dies. The wife's going to be just fine. No debt, no kids at home, and $1 million to live on. They're going to be fine. They became self-insured by building wealth, getting out of debt, and raising their kids to be grown and gone—not living in their basement. That's self-insured. You'd lose the need for life insurance. That's why we suggest term life insurance instead of whole life. You don't need life insurance for your whole life. The only whole-life thing anybody wants is commissions for the whole life of those agents.

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QUESTION: Michelle on Twitter wants to know what Dave thinks about supplemental insurance like Aflac.

ANSWER: Some supplemental insurance is good, but most of it is not. I don't believe in cancer insurance because your health insurance covers that. I don't believe in short-term disability insurance. You shouldn't pay for that; you should have an emergency fund built up to cover short-term disability. You should do long-term disability insurance.

You should not do accidental death because you are not double-dead if you die by accident. Your family needs the same amount of money to take care of them regardless of how you die. Some of the supplemental insurance is just dinging you at six bucks a month.

Stuff like long-term care insurance if you are over 60 years old or long-term disability insurance can be a very good buy. I'm not anti-Aflac, but they have several products that I would tell you not to do and a couple I would tell you to look at and consider doing and compare them to other people's prices. A lot of those are just gimmicks.

Cancer insurance just plays on the emotions. I have health insurance, and if I get cancer, it covers the cancer. Someone might say that it doesn't cover your income, but if I'm disabled it does because I have disability insurance. If it's a short-term disability, I have an emergency fund to cover it.

If someone says my family can't eat if I have cancer, I say why not? I have an emergency fund, I'm out of debt, and I've got my investments. It's easier to do all that if you're not spending all your money on supplemental insurance.

Be careful that you're not being gimmicked to death with this stuff. Instead, select carefully and think about overall financial planning, not some hype that the guy in the lunchroom from the HR department is doing. Don't do that because it takes away all your money that you could be doing other stuff with.

You need to self-insure through a lot of that and/or make sure your major insurance areas are covering a lot of that. Get good term life insurance through Zander Insurance for 10 to 12 times your annual income on yourself on a 15- to 20-year term insurance policy. That's life insurance, that's not supplemental insurance. That's a major category.

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