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What Type of Life Insurance Do I Need?

2011 November 10

Dave Ramsey only recommends guaranteed level term life policies since they are the most affordable and allow you to focus on more pressing financial issues. The basic premise for cash value plans (which include whole life, universal life, variable life, and return of premium plans) is to overcharge you in the early years to pay the higher costs in the later years. The premise of term life plans, on the other hand, is that you will not need life insurance for your whole life – so why pay for it? In 15-20 years, you should have enough debt paid down and savings built up to be self-insured. That means you will no longer rely on a life insurance policy, because your family will be financially secure enough to carry on after your death. That is why Dave recommends a 15-20-year plan – although you can opt for a shorter or longer term length if that works better for your specific situation. The same applies for the recommended coverage amount; Dave suggests 10-12 times your income, but if that is unattainable due to budget constraints, some is always better than none.

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