In this video, Dave Ramsey talks to Cynthia in Charleston. She has an indexed universal life policy with a death benefit and wants Dave to explain if that’s a good way to go.
Dave says not to keep it because of all the fees it will constantly accrue, plus the insurance is expensive. It’s hard to take those investments apart and compare them — when you get investments and insurance together, the investments do not perform as they should.
If you went straight to the mutual funds, you won’t have to pay the fees that come along with insurance.
Usually, the insurance side factors in ART, annual rate of return. The older you get, the more it costs to cover you. And, because its more expensive to cover you each year, less and less goes to investments in this product.
What Dave recommends is Level Term, meaning you pay the same amount each month, which you can get by going and shopping quotes for 10-12x your income.
Once your term life policy in in place, cancel the other policy and invest the difference. Even if you have coverage at work, make sure you have some outside of work in case of a medical event that would make you uninsurable in the marketplace.
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Universal life insurance is a type of permanent life insurance that includes an investment component. Policyholders pay a fixed premium, a portion of which goes towards the insurance coverage and the rest is invested in a cash value account. This cash value has the potential to grow over time, and policyholders can access it through withdrawals or loans.
But is universal life insurance a good idea for you? Let’s explore the benefits and drawbacks of this type of insurance to help you make an informed decision.
One of the main advantages of universal life insurance is its flexibility. Policyholders have the option to adjust their premiums and death benefits, allowing them to accommodate changes in their financial situation or insurance needs. This can be particularly useful for individuals with fluctuating incomes or those who anticipate changes in their financial responsibilities, such as children’s education expenses or mortgage payments.
Additionally, the cash value component of universal life insurance offers a potential source of tax-deferred savings. As the cash value grows, policyholders can use it to supplement their retirement income, cover large expenses, or leave a financial legacy for their loved ones. Moreover, the ability to access the cash value without penalties or taxes can provide a safety net in times of financial hardship.
On the other hand, there are some drawbacks to consider. Universal life insurance tends to be more expensive than term life insurance, which provides coverage for a specific period of time. Additionally, the investment component of universal life insurance is not guaranteed to grow, and policyholders may face financial losses if the market underperforms. Moreover, withdrawing or borrowing from the cash value can reduce the death benefit and may have tax implications.
Before purchasing universal life insurance, it’s important to carefully consider your financial goals and insurance needs. If you value the flexibility and potential for tax-deferred savings that universal life insurance offers, it may be a good fit for you. However, if you are primarily looking for affordable coverage for a specific period of time, term life insurance may be a better option.
In conclusion, universal life insurance can be a good idea for individuals who want the flexibility to adjust their premiums and death benefits, as well as the potential for tax-deferred savings. However, it’s important to weigh the benefits and drawbacks to determine if it aligns with your financial goals and insurance needs. Consulting with a financial advisor or insurance professional can also provide valuable insight into whether universal life insurance is the right choice for you.
exellent information
Insurance is NEVER EVER an investment vehicle for building wealth.
I disagree with what this guy is saying in this video. The information he's giving about IUL Is not one hundred percent accurate at all. I know regular people whom whom are promoting these types of policies, and they are very successful people from all walks of life.
Don’t listen to this old school crap
When you make "Dave- like" money, vanilla beans are a good investment. Dave doesn't go for that imitation vanilla crap.
I admire you Mr Ramsey. However it would have better to admit that you don't have enough information or knowledge about UIL. This was a response way out of topic.
If you're interested in life insurance and investing, it's advisable to follow a different approach. Instead of opting for Universal Life Insurance (ULI), which can be costly, consider purchasing a more affordable term life insurance policy. For instance, you could obtain coverage of half a million dollars by paying just $100 per month. By doing so, you can redirect the money you save into investments. To optimize your investment strategy, it would be beneficial to seek guidance from a knowledgeable financial coach, such as those available at Primerica (They will provide the insurance and a financial coach that will manage your investments). They can assist you in managing your investments effectively while ensuring that you incur no unnecessary fees. With this approach, you can secure a robust life insurance policy and watch your money grow through smart investments, providing peace of mind and financial security.
Dave – are we telling the whole truth and nothing but the truth. A major point that is missing the advice of how a UL really works for not a rate of return but the loss due not controlling the bank interest rates the banks charge? Right now very high 6-8% for good credit. Albert Einstein, which I think is pretty smart guy, says that the 8th wonder of the world is compounding interest. The most important thing is not to interrupt the interest. I've bought 2 vehicles paying less than 2% interest while I earned interest on that money. The compounding interest out performs the interest paid on the loan.
The extra fees are worth eliminating the risk when investing
Never ask a mechanic your health questions.
Use your own due diligence. Honestly, this man has no clue what he's talking about.
IUL = 2types. Cash benefits OR Death benefits
Index = you don't loose when market crashes
401k. Put it in Index annuity.
Get ROP INSTEAD of Term insurance if you qualify.
All financial investments lost in 2008 crash. Cause they are not indexed.
IULs should not go up in monthly premiums. They’re designed for the client and according to what makes sense to the clients budget. I’ve written a policy for 150 a month. And the client has the choice to contribute more if they wanted to. And people USE them as a retirement strategy, it is not a retirement vehicle. If funded correctly you can shave years off the “65” retirement age.
He teaches you how to have your money right when you retire. His way of teaching might not be for you but it doesn’t mean he’s giving bad advice. Everything isn’t for everybody.
Tell a wealthy person to invest in a 401K or Roth IRA and they will laugh at your face. This ignorant garbage should get banned for misinforming the public
Why does it remain legal to sell it
I wonder how those Roth IRAs and 401ks are doing now
you do realize there's difference in universal life and a IuL (INDEXED UNIVERSAL LIFE). Shes talking about IUL and your talking about universal life.
Dave Ramsey is 100% right you make absolutely no type of profit over time having an IUL which is not an investment it’s a bad life insurance product. compared to having it in an actual investment vehicle. No wealthy person has ever said they made their wealth from an IUL lol. Only people who love these are the agents who sell it !
I understand putting money into a term and invest the rest into a roth or a 401k in most situations. My question is lets say your in one of these situations: you max out your roth/do not qualify AND job does not offer 401k, options in 401k are bad (understand should still do the match), max out both 401k and Roth IRA. Wouldn't it make sense in this case to invest in insurance because of the tax benefits vs investing in a taxable account?
Dave where did you get your license and experience on life license buddy? If not you have no right to bs about something you have no idea about it
Wow. He just sold her a term policy through zander. Did anyone catch what just happened here. You have to be able to read through the BS in life. Dave has alot of good ideas but keep in mind guys he runs a business to make money for himself to be profitable. Everyone has opinions.
Love Dave for a lot of things but he literally thought that she was buying an IUL or GUL through her employers 401k which is impossible
what about taxation Dave? it's not hard to structure properly
Im just gonna find a good mutual fund.
IUL is asset
401k. Is horrible
The one that I had that did not let me convert it was from American General. The new IUL that I purchased was from Midland.