Keep being ripped off!
Question: Rob's dad has 2 whole life insurance policies on Rob and his brother, and another on his wife. He has a mortgage, and Rob was telling him about Dave's plan to get term life insurance and cash it out. Dad thinks he won't get any value from cashing them out, but Dave stresses how important it is to do just that.
Dave Ramsey's advice: He's been ripped off for many years, and every day he keeps it, he's being ripped off more. If he's been screwed over for 20 years, does that mean he wants to keep getting screwed over? This is the worst financial product that the middle class buys. Don't put money in a pocket that has a hole in it.
Stop the bleeding now. You can't keep that stuff, it's nasty. Only keep it if you can't get other insurance and you need insurance. Get the cash value out and get rid of it, but only after getting term life insurance in there first.
I would rather take a term life policy for 30
years because the difference in the cost of a
term life(which lower than the whole life) can
be invested in a long term mutual fund paying
me a nice return on my investments. When the 30
years is up, I will have a large amount of
money to leave to my wife or children and my
home will be paid for. If I gave this money to
a whole life than the insurance company will
use it for their gain and take cruises, buy
investments at my cost. I think it is more
smarter for me to keep my money to invest.
My wife and I have been long time listeners, purchased the Total Money Makeover and are currently enrolled in Financial Peace at our church. My wife is an assistant professor. I was an IT systems administrator and now I am in insurance and financial planning. While watching the video segment on insurance I cringed at what you were saying about whole life insurance. It caused me to do some serious praying and soul searching. This letter is part of what I have prayed about and done further research on.
Whole life is not the rip off or dog you claim it to be. Whole life policies for kids while not accumlating lots cash value initially, does provide insurance for children in the event that something happens that causes a child to become uninsurable (from say type two diabetes or leukemia) in the future. What does this guaranteed insurability do? It protects your children's children and allows the purchase of additional whole life insurance in the event of future uninsurability. This is an advantage, not a rip off.
Also, Dave, have you heard of BOLI? Bank Owned Life Insurance? This is cash value life insurance that many reputable banks use to provide for benefits for their employees. Why do banks use it? It allows tax breaks for the growth of banks funds and provides for employees benefit and retirement plans.
I will say this, don't believe me about cash value insurance not being a rip off. The IRS will tell you it is not. How? It limits how much you can put in cash value policies because of the tax deferred earnings you can accumulate with it. It also does this for 401(k)'s and IRA's. There is some benefit to cash value life insurance.
In light of the recent stock market crash I wonder if your view has changed at all. That crash was caused by insurance companies and financial institutions that were led by greed and were stock owned companies investing large amounts of their portfolios in risky, overly aggressive parts of the market (ie sub-prime lending). Many, people that have lost a lot of their "smart" investments are now probably wishing that they would have had some of their money invested in a much safer vehicle, such as cash value life insurance. My suggestion to them and to anyone seeking such avenues would be to find a mutual life insurance company that has the highest possible ratings from Moody’s, AM Best, Fitch and Standard and Poor’s and talk to an advisor. Then check with a CPA and a broker. After all of that pray. Then they will have devised a plan and taken into account all that needs to be seen.
Is cash value right for everyone at every time? No. But, neither is a diet of only broccoli or ice cream or sausage, I am sure you get the idea. Just like our diets for our physical bodies must be diverse so should our investments. Cash value life insurance if used as a portion of your investment vehicles can provide value and protection for families. If something does that it is not a rip off. When and if I think it doesn't I don't offer it to clients.
I was perusing your website and saw that you charges $2000 to $3950 to become a counselor for Financial Peace. Why is the price so high for the classes?
I hope I get to hear a response to this email. I will prayerfully look forward to it.
Also, please pray about the tone you sometimes take on the radio show. Larry Burkett was also a good Christian financial advisor and I don't believe I ever heard him say anything on the radio that would have offended someone.
In Christ,
Charles Neville
573 228-1915
1915 Thoreau Court
Columbia, MO 65202
Policies as an investment?
Also, do you think it is prudent to do a 20-30 year term with a Return of Premium option? Example:
37 YO male, non-smoker in exellent heath can get a 20 year term with waiver of premium for Around $21.50/month. Then you can purchase a ROP rider and the premium goes up to around $40.00/month....but you get all of the premiums back, not including the $3.70/mo for waiver of benefits. This totals around $8,400 you get back at the end of the term. The amt you've paid in is also added to the death benefit during the term. To invest this, you'd have o have a plan yeilding around 6.25% interest. Do you think it is worth paying the extra $18.50/mo ?
Don't get me wrong...I LOVE YOUR REPORTS...you have helped save me lots of money over the years, so keep up the great research, common sense ideas and reporting!
Scott
a lot of money in the first part of the policy? What would you think about a policy that you could get
from New York Life, called Increasing Premium Term. This product would basically be a term policy that
renewed every year but you would never have to get reapproved every again. The reason for it being called
increasing premium is because it follows the mortality table and you premium starts very low and just increases
alittle each year. This saves money when buying this verses the long period term and you are able to invest
more in the early years. I am very interested to hear what you have to say about this. Please email me!
Dave provides. However, I do have a question about the life insurance debate. When I was 26 years old I
bought a $150K WL policy from NML. The premium is $1,442 per year. If I had bought a 30 year term policy it would have cost around $300 so that would have left me with 95.17 to invest each month. Using the investment calculator I put in 95.17 per month for 30 years with a return of 10% per year. Of course assuming taxes of 30% you don't really have a return of 10%, it is closer to 7% which I used. At the end of 30 years my investment would have grown to $116,782. I am now uninsurable so at the end of 30 years the term life insurance is gone but I do have the investment of $116,728. (not taking into account the stock market meltdown which means if I died inconveniently at the first of March 2009 the value of my investment would have been reduced 40-50%. And upon my death is this going to be taxable to my wife? I'm not sure. My current policy (still in force) will have a cash surrender value of $108,534 at year 30. Not as much as the investment but close. However, if I die right now the total death benefit is $221,598 non-taxable. Which would my wife choose? Also, I have paid a little extra each month for a waiver of premium benefit which would have continued to pay my premium if I became disabled. In all liklihood the $95.17 investment each month would have been discontinued. I admit I struggled at the beginning with the premium but and if a young parent is unable to afford WL then term is certainly a good option. But term is temporary insurance and at some point it will expire or become prohibitively expensive. If you generate a sizable estate isn't insurance a good way to pay the estate taxes that are surely coming back? Dave, I wonder if WL is always bad or if there is just a lot of bad WL? Is it fair to treat all companies the same? Keep up the good work!
Just FYI.
Art Williams routine he began in Columbus, GA,
in the late 1960s. I think it's a bit too
simplistic; such an approach, being so rigid,
so judgmental, can most often be more harmful
than beneficial. Over the past 40 years, Art
and his neophyte disciples have left a lot of
mess in their wake.
for me I look at it like another little savings account in case I ever really needed it, unless I am ruly a dummy, I do not see a downside unless you are missing a meal to p[ay the bill.Term is what I carried when my children were small that is all I could afford, glad I was able to switch. Thanks for the chance to give my ten cents. Shanley Brown