Thursday, September 12, 2013

Life Insurance Awareness Month

September is Life Insurance Awareness Month.  Over a year ago I posted an post about how we changed our life insurance due to going through Dave Ramsey's financial peace class.  We canceled our old policies and signed up for new 15-year term policies with a child rider and canceled our old insurance including William's Gerber Life policy.  We were sold on Gerber Life as good insurance with a college savings account but learned that it was a rip off for our family.

Dave Ramsey and many others recommend to get level term polices for at least 10 times your income.  If we invest 10 times our income in a good growth stock mutual fund that interest would at least come close to replacing the lost of my income if something would happen to me.

Why term life insurance?
We chose to do term life insurance because it is cheaper and we will be disciplined enough to invest the difference in a Roth IRA.  Money investing in a IRA invested in a good growth stock fund will get much better returns than that of a cash value life insurance policy.  Life insurance should not be where you make your investments because returns are historically low.  Additionally, when you die with cash value, the insurance company keeps the cash value.  Also, the fees deducted from your returns are extremely high.

Fourteen years from today our family will be debt-free including our mortgage and investing a good portion of our income for retirement.  This should allow us to become self-insured and not have a need for life insurance.

For more information check out Dave Ramsey's Website or feel free to ask questions in the comment section below.


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