Who is Dave?
- Author of the book Total Money Makeover
- Personal Finance Expert in Debt Elimination
- Does not believe in using debt for anything, cash is king
- Hates Whole Life and any Permanent style insurance product
Before we can dive into the Dave Ramsey Whole Life Insurance Review and his strong advice against any permanent life insurance product, we wanted to introduce Dave Ramsey to you.
Dave Ramsey has made quite the name for himself in the personal finance community over the past decade.
Dave is the best known for his book The Total Money Make Over.
In addition, he has made a career out of helping people eliminate debt and continue on a path of financial freedom from debt.
A popular saying by Dave is: “Debt is Dumb, Cash is King”
Dave HATES debt and he is very clear about this in his message to the public. From Dave’s books to his podcast, and blog content he is clear that there is no place for any type of “loan” in your life.
So why do we share all of this background about Dave with you and how does that have anything to do with Dave Ramsey Whole Life Insurance Review.
Dave along with hating debt of any kind also HATES Whole Life Insurance and when he finds out any of his followers have it or are considering it he makes sure they stop right away.
We feel Dave Ramsey’s view on whole life insurance needs to be reviewed. Especially since we do not believe that all of Dave Ramsey’s education and advice to his audience is helpful or accurate. Enjoy our Dave Ramsey Whole Life Insurance Review.
- Dave became a debt guru from his own debt issues
- He uses his past to help others
- His past greatly influences his strong beliefs against debt and financial institutions
So how did Dave become this successful financial guru? I am sure this would not be the first thing you would think of. Dave Ramsey became the famous debt eliminating adviser he is today BECAUSE of debt!
It’s comical actually.
Dave was not always the spokesperson for no debt and cash only living. Prior to the success Dave is today he crashed and burned when he decided to over-leverage his life in the real estate industry.
Now I want to be clear, Dave is not a fraud. He actually speaks freely to his hardships and the errors he made in the past with debt. Overall Dave seems to be a great guy and very helpful to millions of individuals. We are just poking a little fun at the fact that Dave’s debt problem actually helped him find a niche that has made him millions.
We believe that Dave’s past hardships with debt and leverage play a very important role in his avoidance of whole life insurance.
In addition, we believe that his unique audience who he is helping generally fall outside the ideal group who should consider Whole Life.
We will go deeper into what I mean by this later in the article.
- Overall Dave gives good advice
- Dave has a specific audience he is targeting
- His specific audience could be the reason he gives general advice against whole life
Personally, I have read Dave’s book, total money makeover, and his business-focused book EntreLeadership.
I have listened to his podcasts and have been apart of this training called financial piece university.
I believe that Dave gives solid advice overall. Honestly, I think that if more people would consider following just a few of Dave’s recommendations they would be better off.
The area that I felt stuck out is Dave’s blatant hatred of Whole Life Insurance. Dave says that whole life insurance is a “total rip off”.
I believe that something very important to consider taking this advice from Dave Ramsey. Dave’s audience is generally middle to lower class income earners with high levels of debt and poor credit. These people are looking for financial planning advice because generally, they believe they cannot afford it. In addition, they most likely grew up with very limited financial knowledge.
So guess what! If this was my personal audience I too would NEVER suggest that a whole life insurance plan is a good idea. So why doesn’t Dave give a more balanced perspective on the topic?
Here is what I think is going on…
Dave Ramsey’s Logic on Whole Life Insurance
- Dave gives generalizes advise on the topic
- He overestimates the returns you “could potentially get”
- He compares investing in the stock market to investing in whole life (Apples to Oranges)
What we note in many different situations is that Dave’s advice tends to be generalized. Dave has systematized his business model and this includes advice on whole life insurance. Dave will not ever suggest you buy whole life insurance or any permanent insurance plan.
When speaking to Dave or any of his advisers you will be advised to buy term insurance an invest your savings into mutual funds. Also commonly known as buy term and invest the difference.
Dave most commonly suggests placing your money in an index or mutual fund will return you a 12% – 18% rate of return. Who wouldn’t do that!
I can tell you what if I was getting just a 12% annualized return I too would be more focused on that investing method. Unfortunately, I believe this is where Dave’s advice is just too broad.
Whole Life Should Not Be Compared To An Investment
Dave over and over again will state that whole life insurance is not an investment. If you are “investing” any money into this product you are wrong! Well, Dave, I would have to agree on this topic!
Whole life is not a place to “Invest”. We don’t believe that investment grade dollars should be allocated in whole life.
On the contrary, I do believe that low performing dollars such as those in CDs, savings accounts, and money market accounts can be moved over time into a whole life plan and provide you with a higher-performing asset with limited risk and liquidity of your dollars. In addition, it will provide your beneficiary with a tax-free death benefit and time of death.
Simply stated: You have two different dollars when investing. Investment dollars and saving dollars. Your investment dollars can go into the market or mutual funds or real estate whatever you prefer. BUT whole life is NO place for your investment dollars.
They are not the same dollars and this is very important to remember.
When Dave compares putting money into whole life insurance and investing he is really comparing apples to oranges.
Dave the Guru, not Dave the Financial Adviser
- Dave holds no financial designations
- People such as Certified Financial Planners have a governing body to protect consumers
- Dave has no governing body when he gives advise
An important item to note is that Dave does not hold any investment licenses. This seems to have been done with intent. We believe it is to exclude Dave from any potential lawsuits when it comes to investment and or financial planning advice he give publicly.
This is great for Dave but unfortunately, this also leaves his advice very unregulated, and more than once has it been a topic of concern.
Dave’s Marketing Dilemma
We believe that Dave is in a marketing dilemma.
The reality is that Dave Ramsey has so many people following his advice he needs to guide his general audience down a safe path. In an effort to do this and not over complicate his message Dave has made it a point to not ever suggest any type of whole life insurance to his followers.
We at Top Whole Life understand that it is not easy to explain the details of the whole life insurance policy over the phone or a podcast. Trust us we have dedicated countless hours to help people make good buying decisions.
In addition to the proper design of a whole life policy, you need to know a lot of information about a client before suggesting it as a good fit.
Dave the Expert Marketer
- Banks and Corporations own trillions of whole life insurance
- Permanent life insurance is an asset class for these companies
- Why would big companies buy if such a bad deal…Dave?
Now that we have an understanding that Dave has a very specific audience and he has committed to one form of advice. The term, not Whole Life. I am not here to convince you that Dave is wrong. You can review all the data and make your own decision. Dave is just one man who has found a way to market his principles to millions.
Dave is a businessman and an expert in marketing. The internet was able to launch his success even further in recent years.
Banks and Corporations Own Whole Life [A lot of Whole Life!]
Let take a moment to talk about who does your own whole life insurance? Two of the biggest consumers of this product are major banks as well as corporations. These companies purchase more whole life insurance then they do real estate to keep on their books as liquid assets.
Take a moment and think about the last statement. Banks, corporations, successful business people all own whole life insurance and you have Dave saying the stuff is horrible? Dave is using a blanket statement to HIS personal audience to say that whole life insurance is not a good place to start. But to say that whole life is bad is false.
If whole life insurance was such a bad product then why are some of the most successful business people as well as major banks and corporations buying trillions of this stuff?
The answer is the product works, and it provides guarantees that these major institutions trust after heavy analysis. I am sorry Dave but there is no insurance agent conning Bank of America to buy millions of whole life.
So maybe there is something Dave is not telling his audience?
Should You Buy Whole Life?
- Should Consider Buying Whole Life?
- Should you Not Buy Whole Life?
Whole Life Insurance can be one of the most valuable assets that you buy every in your life. If will provide you with guarantees that a term insurance policy can not provide you.
From our experience, if you are still in major debt we would agree with Dave don’t buy a whole life policy yet. We would, however, suggest that you lock in an affordable term insurance policy.
Special Note: Do not just buy any term policy. Not all term products are the same. You will want to buy a term policy from a strong mutual company. This will give you the option to change the policy into a whole life in the future if you need to.
If you need Dave’s help Whole Life Probably Is Not For You Right Now…
- To buy a whole life insurance policy you will need to be able to commit to set premiums.
- These premiums will be higher than a term product.
- More complicated to understand than term insurance
- Do not take loans
As a follower of Dave, there is a good chance there is an income/debt problem. So allocating additional funds would not make sense.
We find that Dave’s followers most likely have ongoing issues with budgeting and overall money management. Therefore Whole Life may not be an appropriate fit.
Whole Life Insurance is not an over complected product but it is far more detailed than term insurance.
Honestly, if you are earning below $80,000/ year individually or you have debt beyond $10,000 you should not commit to a forced savings plan like whole life.
Whole Life Insurance Loans and Dave’s Advice
How does this correlate to whole life being bad? The simple answer is it doesn’t, but Dave advises to have not debt ergo no loans so that means that your whole life policy is bad…go cancel it.
Just kidding, let me explain why we believe Dave sticks to his advice of no whole life.
Dave Says No Loans
Where I believe Dave sees whole life to be the second biggest issue for his followers is that to access the cash being saved in a taxed advantaged manner you sometimes use the loan feature on the policy.
Well, it is clear that Dave doesn’t do loans or debt even if its to obtain a tax advantage so this would be out of the question. I completely understand this view and from that perspective, if he did suggest whole life then ultimately he would contradict his advise.
So what is the solution for Dave, never ever recommend whole life
Dave is very clear on his position about whole life insurance and any permanent life insurance product on the market. He does not feel it is a good fit for anyone who is listing to his advice.
We believe that a big reason for this is that Dave’s key demographic has much bigger problems such as income restrictions and major debt and to consider whole life as a part of his financial recommendations would create confusion.
Rather than spark his listener’s interest Dave completely shuts down any consideration of this product and will only suggest term life insurance. Although we believe that Dave is over-generalizing his advice we understand why. In the bigger picture, he is going to help more people.
The reality is that permanent life insurance products are extremely good savings vehicles and provide several tax advantages for higher-income earners with no debt. Clearly, this is the case when you consider that banks and corporations own billions of Whole life policies.