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How Much Term Life Insurance Do We Need and What Time Period Should We Buy?

2011 December 16

Dave Ramsey recommends term life insurance for individuals whose families depend on their income and/or have debts that could not be paid from their current assets. Otherwise, he feels there are much smarter things that you could do with your money. Per Dave’s advice, Zander Insurance only offers guaranteed level term life plans. Dave tends to lean toward the 15 or 20-year plans, which allow you time to greatly reduce and eventually eliminate the need for life insurance through saving and paying off debt. The exception to the 15 or 20-term rule is for younger folks who may just be starting their families and need a few extra years to get their finances in order. As you get older, the cost difference between different term lengths increases and does not represent as strong a value.

Consider getting 10-12 times your income in coverage. This is the amount Dave recommends to provide your family the resources they need to maintain their current lifestyle and continue in their financial journey. You can consider “laddering” policies and purchase numerous policies with different level term periods to address the different types of debt and savings/earning potential that you have. is the most important thing is to make sure you don’t go too short on your selected term length since the costs of these plans increase substantially at the end of the level periods.  It is generally advised to buy a slightly longer period than you anticipate needing (especially if there isn’t much of a difference in premium) to give yourself some padding.

If 10-12 times your income in coverage is not within your budget, Dave’s first advice is to lower the death benefit to an amount that would still provide financial protection – something you can get by on for the near future while trying to address the reasons for the higher cost.  You can also shorten the level guaranteed period to a 10-year term and increase the coverage amount.  It depends on your debt and savings situation as to whether a lower face amount or a shorter term period is the most beneficial, cost wise. If you need help determining which would be better in your specific situation, give us a call at 1-800-356-4282. If you’d rather see how the numbers pan out yourself, visit our website to run free, instant quotes for different term lengths and coverage amounts.

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