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Is Term Life Insurance Better Than Whole Life Insurance?
Рет қаралды 109,495
6 жыл бұрынDon’t waste money on whole life insurance. Protect your family with term life insurance: goo.gl/LFpCEj
SUMMARY
In this video, Dave answers Ray’s question from Facebook. Ray asks, “Why term life insurance instead of whole life insurance? What is the difference?”
Term life insurance is just like any other insurance. You pay for insurance, and your beneficiary gets your money if you die. Cash value insurance, however, doubles as an insurance policy and an investment vehicle.
Say your term life policy costs $5. The same amount of coverage for whole life would cost you $100: $5 for the insurance and a $95 premium. That’s 20 times more expensive for the same amount of insurance!
Let’s say you want to close your whole life policy. Not only is the rate of return on your money so low that it won’t even allow for growth, but you could even have to borrow your own money that you paid and then pay interest to the insurance company. Additionally, when you die, your beneficiary will receive the face value of your policy, but all the cash you saved up is kept with the insurance company. It's one of the worst financial products in the world!
Dave always recommends term life insurance. Get 10-12 times your income and cover the ones you love.
RESOURCES
How much term life insurance do I need? Listen here: www.daveramsey...
Hear more about the tax implications of cashing out whole life: www.daveramsey...
Thinking of switching to term life insurance? Read these term life mistakes to avoid: www.daveramsey...
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@hw2211 4 жыл бұрын
I had made the fatal mistake of investing into a whole life policy. As I soared to look at the money out in vs the money earned I saw I was -4K in the hole with cash value at $6700k. I just told my agent who posed as a friend that I want out. He tried to convince me but after seeing this video two days ago my mind was made up. Thanks Dave for the advice.
@astroman30 3 жыл бұрын
I'm sorry you were scammed.
@CC-rk8oc 2 жыл бұрын
I almost fell for the same trick from a college “friend” thankfully i opened a Roth IRA and not this bs life insurance
@galloe 2 жыл бұрын
Can you explain this to me more clearly? I'm not sure I understand. I also want to find out whether it's worth it for me or not but I don't get some things you said. What do you mean by "money out" vs "money earned?" Is the cash value the money earned?
@atrain198544 Жыл бұрын
that sounds like an IUL buddy
@HonestFinance 6 жыл бұрын
Yes it is. Term is the right way to go. Dave opened me up 15 years ago to insurance. Thank you.
@kyleh628 2 жыл бұрын
Dave gives some bad advice on this subject. He is all against whole life insurance but is an advocate of Long term care? What he must not know is that some life policies have LTC riders that provide monthly benefits for Long term care expenses if needed down the road. Dave is all for long term care, but not until you are in your late 50s? I run into a lot of people that have knee problems or back problems at this age and can't get long term care. Get a smaller whole life policy with a long term care rider and still have the majority of your insurance with term. This will save you in the long run because traditional long term care polices are VERY pricey!
@2101370 4 жыл бұрын
Dave is RIGHT! based on cash outflow, term life insurance is the BEST priced form of death benefit. In a 20 year period you simply pay SO MUCH LESS for term insurance. AND a ton of insurance agents sell them for commissions.... Here is what Dave never talks about: Using the chassis of a life insurance contract to replicate the FIXED INCOME component of your portfolio. Whole life policies are NOT investments. They are however, IF funded correctly AND with only LESS THAN A HANDFUL of insurance companies are absolutely an asset. They should NOT be compared to equity based dollars but have the capacity to certainly hold their grounds as an alternative to fixed income and cash alternative portfolios. The death benefit of whole life is almost a byproduct at that point!
@cherodgadson2419 3 жыл бұрын
What about the fact term only pays out to 1% of policy holders y'all need to do more research
@03C_R Жыл бұрын
Whole Life agents can sell term insurance but they always sell Whole Life because it gives them way more in commission, scum of the earth agents
@esgee2464 4 жыл бұрын
I’m a single mother of 3 although one is an adult now. I have thought about this for years but didn’t understand it. Dave explained it well so I am going to do it now. Thanks Dave!
@harrison6082 6 жыл бұрын
I can't wait for Dave to discover pizza insurance
@mamajen8584 6 жыл бұрын
Harrison Ressler lol that rant will be awesome
@clifftoncallicott6572 4 жыл бұрын
I almost dropped my phone this comment is so gold.
@louisiannef3122 4 жыл бұрын
What is pizza insurance?
@harrison6082 4 жыл бұрын
@@louisiannef3122 Hypothetically, say you buy a pizza from Domino's and then on the way home you drop it and the pizza falls on the floor before you can eat it. Then pizza insurance would pay for you to get another pizza free. (Free because the insurance will cover it)
@emmanueloshaddai3259 Жыл бұрын
@@harrison6082 lol
@beautifulangel32 6 жыл бұрын
Thanks this always confused me
@MrOccyc 4 жыл бұрын
I was conned by my financial advisor to get a whole life policy. That lasted about 15 months when I started listening to D. Ramsey. I should have known better because it was hard getting actual data about the policy.
@thundergirl6518 2 жыл бұрын
Hello Sir. Thank you very must for the information. I do have a term life policy. It ends at age 80, what should I do if by some miracle I live to be that age? I am on a fixed SSD income. I am hoping you or someone on this thread can answer my question. Thank you.
@AlexWinkler 4 жыл бұрын
Made a video about this, I call Whole Life my "$30k Mistake"
@astroman30 3 жыл бұрын
I'm so sorry you were scammed.
@sappysamurai5170 5 жыл бұрын
Agents who sell this do not care about you. They know all this.
@mjamesbrown7499 4 жыл бұрын
Sappy Samurai 😂 that’s not true! I’m an agent!
@waynejamel6703 2 жыл бұрын
Smart... the idea of having a plan that is 10x ur income so that the interest would cover your family
@eatpigsnot 6 жыл бұрын
is term insurance better than whole life insurance? is Toronto north of Miami?
@randomkid7390 5 жыл бұрын
Is the north pole north of the South pole?
@cherodgadson2419 3 жыл бұрын
Term doesn't pay out you will more than likely out live it and then when you need a whole life policy won't be able to get it
@eatpigsnot 3 жыл бұрын
@@cherodgadson2419 you want to outlive term. if you do and you follow what Dave teaches you will be self insured. that means you will have no need for life insurance
@clintc.272 4 жыл бұрын
I had a client come to me, they went through Zander 9 years ago to get a term policy because he was recently married and just bought a starter home that he knew he wouldn’t be in for more than 5 years. They suggested a 10 year term policy for him and his spouse. Seven years later the client bought a bigger home and then had another child. By the time he came to me he had his 4th child and needed more life insurance. When I walked into his office he told me upfront “Dave Ramsey can do no wrong.. I only want term insurance.” I told him that I offer a multitude of products but before I make a recommendation on what may be best I would just like to ask you some questions. As I proceeded to ask question I found out his term policy that he had previously terminated a year ago and he needed a little under a million for himself and a few hundred thousand for his spouse. When I asked him why he only wants term insurance he spouted a Dave Ramsey infomercial. So I respectfully told him my point of view (which was to purchase a lump sum in term for both of them and a smaller limited pay whole life policy). Needless to say we just did the term. 3 weeks later our underwriting comes back. The wife was declined and the husband was rated. Trying to find a solution for them I asked to look at their current life insurance paperwork to see if there was a conversion option on the wife’s policy.. Unfortunately the company that Zander recommended did not offer permanent life insurance. So she couldn’t get insurance and his term insurance policy ended up costing a little less than how much it would have cost him to buy a whole life policy 7 years ago due to the table rating. And while in my discovery conversation they also did not get a 12% return on their mutual fund nor did they have enough money to purchase a disability policy for them both. Dave YOU should be ashamed of yourself.
@u_s_scaper 2 жыл бұрын
He also doesn’t mention that a lot of insurance companies approve you without a medical check so they can start making money off you and then do the underwriting process after you die and not pay out to your family. Or that the rate goes up drastically at an older age, or that companies decline you at an older age if you develop health issues. Whole life stays the same price forever and once you’re in, you’re in and will get paid no matter what happens to your health.
@ocjaries Жыл бұрын
@u_s_scaper exactly, in other words, Generational Wealth
@deepashamusic 2 жыл бұрын
What if you, for example are 30 yo and buy a term life insurance for 30 years and you don’t die in those 30 years? Does the accumulated money just go to waste or it just stops accumulating after the term but your beneficiary gets paid out whatever was accumulated in those 30 years? Thanks
@lilido5654 Жыл бұрын
You’ve got to speak to a broker and they can spend time telling you how it works A scenario for 30 years old Term for 30 years There’s living benefits for cash back option or no cash back Cash back or return of premiums $30 monthly premium is no No cash back $$250 monthly premium is cash back options. So it’s a savings account and insurance
@hilariohernandez 5 ай бұрын
There is no accumulated money. In that scenario you want to accumulate (invest) separately. Dave has said in a traditional IRA or Roth IRA in good mutual funds.
@Trevonious95 4 жыл бұрын
Can I get term life insurance for parent that has asked me?
@lilido5654 Жыл бұрын
You should definitely get term if you can
@nrenoll 6 жыл бұрын
My husband and I have had whole life policies for almost 20 years. Now that we're both 40 with medical issues, if we cash out and switch to term policies, it would cost us the same monthly premium. Does anyone have a suggestion of what to do in this case?
@briannacc3983 6 жыл бұрын
Nadia Renoll switch to term insurance. Term carries a higher death benefit.
@jtugg384 6 жыл бұрын
Buy term and invest the difference. Are you in GA?
@EdRadley 6 жыл бұрын
If it costs the same and the permanent won't run out but the term would, which would you want? If you take a road trip and it's $100 for half a tank of gas vs. $100 for a full tank of virtually the same fuel, which would you take?
@MrT1-b5f 6 жыл бұрын
jtugg384 she said it cost the same so what difference are you investing?
@rg4562006 6 жыл бұрын
You have should have what is called a reduced paid up option which is usually more than the cash value. What that means is you’ve had your policy for so long that you can take a lower face amount and never have to pay for it again. Dave is correct however he never says anything about the reduced paid up option. My suggestion would be find out the reduced paid up amount and see if that’s an option.
@RayFleener 5 жыл бұрын
Dave, thank you for the good description.
@oliviaesqui799 3 жыл бұрын
Gracias Angélica, cómo están?
@thompson1407 6 жыл бұрын
Where can I find the documented data on rates of return for the whole life insurance? What type of whole life policy surrenders the cash value? What conflicts of interest do you have with Zander insurance? Is the cheapest policy always better? What if the cheapest company isn’t around or raises my premiums to keep my insurance in force because they don’t have the required capital to fulfill death claims?
@madetoprosper5896 3 жыл бұрын
Thank you Dave!
@jonathanfitzpatrick7165 3 жыл бұрын
Zander sells cash value insurance.
@astroman30 3 жыл бұрын
So? The vending machine at the YMCA sells snickers bars.
@midastouch9089 3 жыл бұрын
So what happens when the 30 years is up? Do you renew the plan or what?
@astroman30 3 жыл бұрын
If you bought term and invested the difference, you won't need life insurance. If you didn't invest, you'd be better off saving your money instead of buying a ridiculous high monthly premium on a whole life policy....garbage.
@lulu-qw8xy 4 жыл бұрын
Thank you! ❤
@debratime4d 2 жыл бұрын
Thank you!
@oliviaesqui799 3 жыл бұрын
It's amazingy to discovered all what ir is.
@bho9196 2 жыл бұрын
In addition, all term is not created equal
@astroman30 2 жыл бұрын
Still better than trash value insurance.
@Redcuptalks Жыл бұрын
What company do y’all recommend ? I was looking into AIG or Lincoln
@lilido5654 Жыл бұрын
Use a broker like me We get quotes from all of the carriers we register with and there’s a lot I believe in term with living expenses first! And then IUL for 6-17% investments So just compare the two AIG and Lincoln apples to apples
@lilido5654 Жыл бұрын
Buy term insurance first that has living benefits- Americo and MOO? And then buy IUL
@astroman30 Жыл бұрын
Trash value insurance is a scam. IULs are garbage with their high fees/commissions and capped gains.
@DougAlesUSA 6 жыл бұрын
♦️I will agree with Dave only partly. ♦️ Buy term life insurance in the amount your dependents need until they are expected to take care of themselves and no more / no longer. Where I think Dave and I part ways is the amout of term life insuracne you need to buy should decline each year, not remain even. Why? Well, why do you need this life insurancde in the fist place? Lets give a typical answer. You need it to provide for your child from the date of your death until the child’s adulthood. Well, that span of time they need financial suport declines by one year for each year you live so the amout of term insurance you need declines each year. What you need is not 20 year level term life insurancde but 20 year declining payout term life insurance. But that doesnt exist. So, buy the closest thing you can. Buy the SHORTEST TERM / CHEAPEST RATE term insurace you can find, likely 5 years, then reduce the coverage value each time it expires. Short, 5 year level term life insurance is even cheaper then 20 year level term life insurance. By the time you are 15 years older, when a new term life insurance policy starts becoming more expensive, well, you wont need very much of it any more. If you needed $200,000 of term life insuracne when you are 25 years old and your child is 0 years old, buy $150,000 when your former policy expires, and you are 30, and your child is 5. Do this again when you are 35 years old, reducing the coverage amount and again at 40. By the time you are 40 and your child is 15, you can cut that policy down to about $50,000. When you are 45 and your child is a adult, you have no child depending on you so drop your policy completely. I’m suprised / disapointed Dave is giving the advice he is giving.
@eatpigsnot 6 жыл бұрын
but many people have more than one child and/or a spouse who doesn't work outside the home. life insurance replaces income, and income does more than raise a child, it runs the household. as cheap as term is it makes more sense to leave it in place until it expires rather than the jumping through hoops you suggest.
@randomkid7390 5 жыл бұрын
Fair enough, but the truth is Dave was making the argument for term over whole. He never said to not do what you are saying. Plus he was looking at it from an investment standpoint where the returns equal the income person who passes. So he was saying base it on your income which also makes sense.
@justinacase2623 4 жыл бұрын
I'm surprised you're net worth is not 200 million. I never take financial advice from broke arse insurance sales men
@crystalgeorge8183 4 жыл бұрын
Well I think cancelling it completely when your children are grown is a mistake. It isn't just to replace lost income, it also pays for the funeral. You should at least keep enough to pay for that (15-20k) otherwise you are putting it on your kids
@justinacase2623 4 жыл бұрын
@@crystalgeorge8183 so if you follow Dave, at that time you will have enough in the bank to cover a funeral. If not start at Step one again.
@Georgeqaws 6 жыл бұрын
dave what about term to 100 policies? It's a permenent insurance, which no savings account.
@randomkid7390 5 жыл бұрын
Sounds great to me. You pay for the insurance and that's it, no gimmicks.
@sexyredapple1999 4 жыл бұрын
U do get money on term. I have critical illness on mines.
@timothythompson4036 11 ай бұрын
Dave Ramsey doesn't know what he is talking about. Only 1% of term policies pay any death benefit. All the money paid in is lost if you don't die. I know many people who bought 20 year level term who dropped the policy in their mid 50s because the renewal rate was 6x. They found out they still need life insurance. They then had to buy whole life at a !such higher rate. By the way, Dave has a financial interest in Zander insurance. The term broker. This is the problem with social media. Anyone can get on and pretend to be an expert. Dave has financial incentives to publish misinformation.
@astroman30 8 ай бұрын
Trash value insurance is (at least) 20 times higher than term. Plus, when you die, the LI company keeps your cash value. Buying term and investing the difference far outweighs any whole life policy out there. You just like it because you sell this garbage for the high commissions.
@brittnylapadula9864 4 жыл бұрын
Whats your reccomendation if someone doesn't qualify for term life insurance?
@chrisstaub5880 3 жыл бұрын
Depends on the reason they don't qualify. If it's just because they're older, they might not need any kind of life insurance. It's really only needed if you have debt and/or dependents who rely on you to support them.
@astroman30 3 жыл бұрын
Don't buy cash value insurance.
@crystalgeorge8183 4 жыл бұрын
I have a question if anyone can help. He said if you have a 200k policy and a 100k cash value, then you lose that cash value and only get the 200k. Am I crazy or is that not a 100% return on investment?
@JL-xq9di 4 жыл бұрын
Crystal George the 100k is the savings built up within that policy. So they actually should owe you 300k, but you only have access to that extra 100k while you are living even though that’s money you directly put in that is supposed to be yours
@humb1s3rvant 4 жыл бұрын
@@JL-xq9di correct because 100% would include the principal 100k...that is what an investment would entail... Ramsey is talking about insurance, which is not, in any sense of the word, an investment, and that is how hucksters have confused the language to include these products
@astroman30 3 жыл бұрын
Crystal, you are correct. You lose ALL the cash value.
@lilido5654 Жыл бұрын
Apples to apples So to compare, you gots to look at it side by side and can’t just go by what Ramsey said In this video He talks and makes a lot of confusion bc he’s not showing numbers and benefits side by side But he got one point right but it wasn’t very clear It is the death benefits Why pay $100 whole life for $200k death payout when term is $5 for $200k death benefit If it’s simply as that then there wouldn’t be ppl buying whole life It’s a lot of depending on the person’s age,situation,etc So to answer: He’s saying pay $5 for $200k term life And not $100 for $200k whole life For the death benefit
@labladycooks5793 6 жыл бұрын
Is Universal Life Insurance the same as Whole Life Insurance?
@rg4562006 6 жыл бұрын
El Minimo universal is the most dangerous kind because it’s term insurance that renews every few years so your premium goes up. The plus side is it builds cash value fast however after 15-20 years the monthly premium starts becoming more and more expensive. You are still paying the same amount you have been since the beginning let’s says it’s $20 a month, 20 years later you’re still paying the same amount right. Your true monthly premium is probably $50 a month what happens to the other $30? Your cash value starts paying the difference, do that for another 10-15 years and how much cash value do you have? That’s why it’s dangerous, yes it builds cash value quicker but if you’re not on top of it you will lose it all.
@labladycooks5793 6 жыл бұрын
RG 306 Thanks for the clarification. I am looking at term insurance for my age and indeed it’s cheaper.
@mrsladykm5556 6 жыл бұрын
Hummm....we got universal whole life insurance for our kids paying the least amount, meaning the cash value grows a lot less. Our main focus was to have that insurance for the unknown. Dave makes a good point, lots of stuff I probably need to revisit with my agent.
@BonnieHalfElven 6 жыл бұрын
Or get a new agent.
@kckuc310 6 жыл бұрын
Yes
@serenaholliday2929 5 жыл бұрын
Wow
@rozacurovic125 4 жыл бұрын
0
@ag4713 6 жыл бұрын
I just finished a small book by a Jake Thompson called Life Insurance (how the wealthy use Life insurance as a personal bank to supercharge there savings) He went on an on about term insurance being a junk product and how everyone from Walt Disney saving his company with his Life Insurance policy to Ray Croc using his policy to get Mcdonalds where it is today. It sounded like a good thing if there is any truth to it.
@ccpanel 6 жыл бұрын
youve got to be an insurance agent
@randomkid7390 5 жыл бұрын
It is true that the very rich buy whole life insurance, for tax reasons. Not because whole life is the better insurance. Why would you pay 20x's what term costs just so you can have a savings account that you can't access for free. Why not get term, and invest the difference. The insurance is the same, the difference is who has your money, you, or the insurance company?
@alessandraglaser7663 5 жыл бұрын
random kid because there is zero risk. Investing = risk. Whole life “investing” has no risk, unlike other investment vehicles.
@MartyMcfly3782 2 жыл бұрын
Whole Life is TRASH!
@astroman30 2 жыл бұрын
Preach!!
@debraday9072 4 жыл бұрын
Well I won't be doing that thank you I don't know what to I'm 51 my partner is 54 we just don't want our daughters to pay for our funerals
@rayj.9568 4 жыл бұрын
Debra Day, What are you saying?
@TeeAlexandria 4 жыл бұрын
Ray J. She doesn’t want her children to have to struggle panic and worry about funeral expenses.
@miriamv5323 4 жыл бұрын
My father passed away April 20 & the only thing I paid for were the flowers & the service at the funeral home. My brother also died April 22 so I had paid for his cremation, which was the less expensive choice and as my nephew wished since he had no will. My parents had paid off their plot after my mom was diagnosed with cancer years ago so I didn't have to worry about paying for that. After my mom died, my dad had opened a joint account between him and I, probably to prepare for the time where I'd have to pay whatever unpaid funeral expenses were left. Also, my dad was in the military so I had applied for the burial benefits, I'm not sure if that applies to you but just wanted to mention it. I'm 49 and my husband is 51 so we are around the same age and I can relate to your predicament. I hope this info helps and gives you ideas on how to prepare.Take Care.
@salinah.8031 6 жыл бұрын
BAD ADVICE. He has no idea how insurance works. He's just talking talking talking and has no clue what he's talking about.
@ahumm8280 6 жыл бұрын
Salina H. elaborate please, I could use the info if you have anything to share!
@eatpigsnot 6 жыл бұрын
yeah, Salina the whole life agent never returned to explain
@vivfoxx8809 5 жыл бұрын
Salina H. He is talking talking .. yes but he is providing back to his talk. I'm curious to hear your back up to your statement.
@cascam1 5 жыл бұрын
Ms. Saline H, you have made a blanket allegation because you are seemingly jealous. You have NO palpable evidence to prove the assertions contained therein.
@rethaturner8970 5 жыл бұрын
Salina H. we're still waiting for you to elaborate as why you think he doesn't know what he talking about, inquiring minds would like to hear what you have to say.
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