Ramsey Solutions recommends term life insurance over whole life insurance because it is more affordable and better suited to your actual needs.
Why Term Life Insurance Makes Sense
Term life insurance is an affordable and straightforward option. It is designed to protect your loved ones during the years they need it most. This includes years when you are raising kids, paying off a mortgage, or building savings. Term policies last for a set period, usually 20 to 30 years. If you or your spouse passes away during that time, your beneficiaries receive a payout. There are no gimmicks and no surprises.
Whole life insurance covers you for your entire life. However, it comes with a much higher price. Much of what you pay goes into a low-return savings component. This component provides little financial benefit to you. Insurance companies profit from selling whole life policies more than you do.
The Better Plan
Follow these steps: get out of debt, build a fully funded emergency fund, and invest 15% of your income. Over time, you will become self-insured. Self-insured means you have zero debt, a solid emergency fund, and your investments protect your family without paying extra to an insurance company.
Avoid whole life insurance. Get term life insurance for the years you need it. Invest the money you save on premiums. This is how you build wealth. It also secures your family's financial future.