Avoid Gimmicks


Dear Dave,

What kinds of insurance should I avoid? — Rhonda


Dear Rhonda,

Well, in the life insurance world, you should buy only term life insurance. Avoid any kind of insurance that has a savings program built into it — things like whole life, universal life and variable life. Another thing to avoid is return of premium. This is where an insurance company charges you extra, but gives all your premium money back if you don’t use the policy. It sounds good, but if you’d just invest the extra you pay for that stuff, you’d get all your premiums back, and more, whether you used the insurance or not!

I also don’t recommend gimmick insurances, like double indemnity for accidental death. Think about it. You’re not double-dead if you die by accident; you’re just dead. Your family needs the same amount of money whether you die by accident or heart attack. If you have a family, I suggest 10 to 12 times your annual income in a good, level term policy. Also, stay away from cancer insurance policies. Your regular health insurance policy should include cancer coverage. If it doesn’t, you’ve got a crummy policy and you need to get a better one right away.

So, for the coverage you do need, we’re looking at level term life insurance, good health insurance, long-term disability and homeowners and/or renters insurance. Throw in auto coverage and, once you hit age 60, long-term care insurance and you’re pretty much set! — Dave


About Author

Dave Ramsey

America's trusted voice on money and business, Dave Ramsey is a personal money-management expert and extremely popular national radio personality. His four New York Times best-selling books—Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership—have sold more than 7 million copies combined. His latest book, EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches, debuted at number one on the New York Times best-selling list.

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