For over 20 years I have worked personally with Dave Ramsey, his listeners and team members to help them make important and informed decisions about their insurance needs and the most cost effective ways to address them. Through the years I have responded to over 10,000 of Dave’s listeners regarding their insurance questions.
This blog contains many of the most frequent questions and answers since they provide an excellent resource to Dave's specific advice on very specific insurance questions. I hope you find this information to be a valuable resource that you can refer to many times in the future as you progress along your financial path. Click on the category noted which relates to your question so that you can see the posting currently available. If you do not see your question or still have concerns please don't hesitate to use the "Question Widget" noted on this site for further information or call us toll free at (800) 356-4282.
Many people are surprised that the advice from Dave and I doesn’t always involve the purchase of insurance as the only alternative. Insurance is a key component of any family's financial plan but it can also be a drain and a detriment if the wrong plans are purchased. Implementing the plans and approaches that Dave and I recommend, most importantly, the establishment of an emergency fund, will help reduce a families overall insurance costs and allow them to focus their dollars on more important things such as getting out of debt and growing wealth.
Life insurance payouts are generally not taxable, as long as certain rules are followed. However, there are exceptions. If a business owns the policy and incorrectly deducts the premiums as a business expense, the death benefit could be taxed. Similarly, if the policy owner, insured, and beneficiary are three different people, the IRS may classify the payout as a taxable gift. For those with large estates, the policy’s value could be included in estate taxes, even though the beneficiary doesn’t owe income tax. These cases are uncommon, so most life insurance benefits remain completely tax-free to beneficiaries.
The life insurance plans we offer come with a guaranteed level premium, meaning your rate will stay the same for the entire term you choose—whether that’s 10, 15, 20, or 30 years—as long as you continue making payments. Once your policy is in place, the insurance company cannot increase your rate or alter the terms, giving you financial stability and peace of mind. If you decide you no longer need coverage before the term ends, you have the flexibility to cancel at any time without further payments. This built-in guarantee protects you from unexpected cost increases, making term life insurance a reliable and affordable option. Learn more about the benefits of term life insurance.
Yes, you can. However, it is important to understand that the total amount of coverage that you have in place or are applying for must be justifiable based on your income and net worth. If you already have a significant amount of insurance in place and apply for another policy, the insurance company could limit the amount for which you are approved in order to keep you from being over insured. Remember, Dave recommends having 10-12 times your annual income in term life coverage, whether it is in one policy or split between multiple policies.
Term life insurance is the only type of coverage recommended by Dave Ramsey and his team—never cash value policies like whole life, universal life, or variable life. The reason is straightforward: term life is much more affordable, and you only pay for coverage during the years you actually need it. The idea that you need life insurance for your entire life is a sales pitch, not a financial necessity. If you’re managing your money well—paying off debt and building savings—you won’t need life insurance forever. So why keep paying for it?
Using life insurance as an investment is also a bad deal. The returns are low, and insurance isn’t meant to be a savings vehicle. Its purpose is to provide financial security for your family in case something happens to you while they still rely on your income. That’s it.
When it comes to choosing the right policy, Dave typically suggests a 15- or 20-year term, which gives you enough time to strengthen your finances and reach a point where life insurance is no longer necessary. If you’re younger and just starting a family, a 30-year policy might make sense to provide extra time and flexibility. He also recommends coverage that equals 10–12 times your annual income. This ensures your family can maintain their financial stability while handling expenses like debt, education, emergencies, and final costs.
If you’re ready to protect your family’s future, get a free, personalized quote on our website, or call one of our agents at 1-800-356-4282 for expert assistance.
Dave Ramsey and his team recommend term life insurance for those whose families rely on their income or have debts that can’t be covered by existing assets. Otherwise, he believes your money is better used elsewhere. Following the advice of Ramsey Solutions, Zander Insurance offers only guaranteed level term life plans. The general recommendation is 15- or 20-year terms, giving you time to pay off debt and build savings so you no longer need life insurance. Younger individuals just starting their families may need a longer term, but as you age, the cost difference between term lengths increases, making shorter terms more cost-effective.
For coverage, it is suggested that you have 10-12 times your income to help your family maintain financial stability. You can also “ladder” policies, purchasing multiple plans with different term lengths to match your financial obligations. It’s important to choose a term long enough to avoid facing much higher costs when it expires. If the price difference is small, opting for a slightly longer term provides added security.
If 10-12 times your income isn’t affordable, the Ramsey team suggests lowering the coverage amount to something manageable while working toward a better financial position. Another option is a 10-year term with higher coverage, depending on your debt and savings. If you’re unsure which approach is best, call us at 1-800-356-4282, or visit our website to compare quotes instantly.
Dave Ramsey and his team advise against purchasing life insurance for children, particularly policies like Gerber Life that are marketed as savings or college plans. These policies often involve cash value (whole life) insurance, which is an inefficient financial product that most families don’t need. Since the likelihood of a child passing away is extremely low, any unexpected expenses in such a tragic situation can typically be covered by the parent’s emergency fund.
For those who still want some form of coverage, a child rider attached to a parent’s term life insurance policy is a more reasonable option. These riders generally cost around $50 to $60 per year and provide $10,000 to $20,000 in coverage for all children in the household. If the child later needs life insurance as an adult, they will usually have the ability to purchase their own policy, even if they develop health conditions.
Insurance companies often use fear-based marketing to suggest that a child might never qualify for coverage in the future, but this scenario is rare. Instead of spending money on a policy with minimal benefits, parents can make better financial decisions by investing in options like Education Savings Accounts (ESAs), 529 plans, or mutual funds, which provide real long-term value.
Absolutely not! Cash value plans such as Whole, Universal, or Variable life insurance should never be used as an investment or savings plan. Life insurance exists to provide financial protection when someone has debts that their current assets can’t cover or when a family would suffer financially from the loss of a wage earner. Outside of that, there are far better ways to grow your money, which is why Dave never recommends using life insurance as an investment—ever.
Whole life policies come with serious downsides, including poor rates of return, high fees, and the fact that the insurance company usually keeps any accumulated cash value when you pass away. Some agents pitch the idea of “tax-free growth,” but in reality, the cash value in a whole life policy is only tax-deferred—just like an IRA. That means you’ll still owe taxes when you withdraw the money. Others claim you can borrow against the policy tax-free, but they conveniently leave out the part where you have to pay interest on your own money. Worse yet, any outstanding loan balance gets deducted from the death benefit, reducing the amount your loved ones receive.
There’s no reason to pay for insurance you don’t need, especially when there are much better investment options. If you have access to an employer-sponsored retirement plan with matching contributions, max that out first. From there, investing in Roth IRAs and other retirement accounts will set you up for long-term financial growth without the costly restrictions of a whole life policy.
If your employer is covering the cost of your life insurance, there’s no reason not to take advantage of it. However, if you’re paying for coverage yourself, it’s worth comparing the cost of an individual term policy to what’s offered through your workplace. Employer plans are often easy to enroll in but may not be the most cost-effective option long-term.
The Ramsey team recommends keeping no more than 50% of your coverage through your employer because most group plans aren’t portable. If you change jobs, you’ll either lose your coverage or have to go through medical underwriting at a time when you may need it most. Some plans allow you to convert your policy when you leave, but this usually means switching to a cash-value plan—an option Dave and his team strongly advise against unless you can’t qualify for term life insurance on your own.
Another important consideration is how group life insurance changes as you age. Many plans reduce coverage once you reach 60 or older, and while employer-sponsored rates may seem lower at first, they’re often only locked in for short periods, typically two years. In contrast, individual term policies offer fixed rates for 15 or 20 years, providing more stability and predictability.
If you’re unsure whether your employer’s plan is enough, compare term life rates for free online or call us at 800-356-4282 to speak with a Zander agent.
If your passing would create a financial burden for your family—whether through lost income or unpaid debts—life insurance is a smart choice. Even being debt-free doesn’t necessarily mean you don’t need coverage. The key question is whether your savings can fully support your spouse and children if something happens to you. If you have enough savings to maintain their financial stability without needing additional income, life insurance may not be necessary.
However, having assets doesn’t always mean you’re financially secure. If most of your wealth is tied up in a home or other non-liquid investments, it may not provide the immediate income your family needs. The goal is to ensure your savings generate enough income so your loved ones don’t have to sell assets just to get by. If you’re debt-free but still building savings, a 10- to 15-year term policy can provide affordable protection while you work toward financial independence.
Even if you’re single, life insurance could still be important. If you have outstanding debts, your estate must cover them when you pass, and anything unpaid could become a burden for your family. No one wants to leave behind financial stress.
Want to learn more about whether term life insurance is right for you? Read on.
When Dave recommends that families carry 10 to 12 times their income in term life insurance protection, he is referring to gross annual income. The reason is that, although the death benefit of a life insurance policy is received tax free, once those funds are invested to generate an income for the surviving family members those earnings will still be taxed as a form of income, reducing their overall purchasing power.
The amount of tax may vary from based on earned or unearned income but, with taxes expected to stay level or increase over time (and factoring in the overall low cost of term life insurance), the best approach is to insure to the gross value.
