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Chapter 1: What are the key differences between whole life and term life insurance?
Live from the headquarters of Ramsey Solutions, broadcasting from the pods of Moving and Storage Studios, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. We help people build wealth, do work they love, and create actual amazing relationships.
Christina Ellis, Ramsey personality, number one best-selling author, is my co-host today. Open phones at 888-825-5225. Ricky is in Rhode Island. Hi, Ricky. Welcome to the Ramsey Show.
Hey, Dave. Thanks for taking my call. I really appreciate it. Sure. What's up? So I was just kind of driving around, and I was thinking about different things financially. And I was thinking about how my, I got a whole life insurance policy that was purchased by my parents back in 2001.
I'm sorry.
Chapter 2: How can I determine if cashing out my whole life policy is a good decision?
And so it has like a cumulative value or cash surrender value of $10,811. So I was wondering if it would be financially smart to try to withdraw that. and put that in like a money market fund so that maybe it grows a little larger, a little faster.
How old are you?
I just wanted to get your opinion. I'm 36.
Okay. You're married, have children? Single dad, two kids. Okay. You have other life insurance?
I do through my employer. I have term life insurance through my employer. How much? I think it's $75,000, I believe.
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Chapter 3: What financial strategies should I consider if I'm facing job loss?
What do you make? Uh, before taxes, uh, $62,000. They had me projected making this year after taxes and insurances, union dues, all that comes out. I'm a firefighter.
How old are your babies?
Uh, my daughter is 10 and my son is a nine.
Okay. And how much debt do you have?
I have $10,000 in, um, vehicle debt. $228,000 for a mortgage, and that's pretty much it. Okay.
All right. Are you ill? Are you uninsurable? Can you get insurance?
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Chapter 4: How can I prepare for potential unemployment while managing my finances?
Yeah, I can get insurance. Okay.
All right, so our recommendation, and then I'll tell you why we recommend that as well, is that someone have 10 times to 12 times their income on them in term life insurance. You may or may not want that much, but let's just say, as an example, you went and got a half a million dollars at 36 years old. It costs nothing. It's very inexpensive, 15 to 20-year level term insurance.
It's the cost of a pizza, okay? Now, if you died, that money could go into a trust in mutual funds and would produce $50,000 a year, $4,000 a month for your children. Okay? And that's really the only people that are dependent upon you that would suffer due to your death in terms of income, your income being gone. You follow me?
Right.
Okay. And so the purpose of life insurance is to do that. Now, whole life life insurance sucks.
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Chapter 5: What should I know about negotiating severance when facing termination?
That's why I said I'm sorry when you said you had one. Because it's 20 times more expensive.
Okay.
In other words, what you can buy for $5 of term costs you $100 in whole life. And that extra $95 per $100 is going to build up a cash value inside, which yours has grown to $10,000 after all of these years. And if you die, they pay only the face value. You do not get your heirs, your beneficiaries, do not get the money that you paid the extra $95 to get.
So your face value of your whole life policy is what, $30,000, $40,000?
I'm looking at the... The face value. Yeah, I'm looking at that. I'm looking at the policy now. I don't see where it says the face value. Or just the value. I just know that the accumulated value right now is $10,000.
The accumulated value is your cash value.
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Chapter 6: How can I effectively communicate with my employer about my performance?
And then my death benefit is $100,000.
That's what I'm talking about. Okay, your death benefit. Okay. So you have paid or your parents have paid $5 per $100 for the $100,000 policy. They paid $95 into a savings account to create a $10,000 savings account called cash value. When you die, your death benefit is $100,000. It's like a savings account that when you die, the bank keeps your money.
which makes it stupid okay it's a horrible product it is the payday lender of the middle class all right and if you leave it in there it's only paying about one percent uh growth and and until you die and then they keep it so it's just ridiculous so what would i do if i woke up in your shoes i'd get five hundred thousand dollars worth of term and i would cash this crap in and i'd use the ten thousand dollars christina
Yeah, I think it's just wild that there's a $10,000 pay off the car. I mean, yes, 100%. I know my eyes kind of lit up whenever I saw you at $10,000 in a car payment. And I was like, oh, that's a lovely coincidence. That's pretty perfect. But I do think it's kind of crazy to thinking that this was bought in 2001.
Chapter 7: What steps should I take if I feel my job is at risk?
And a lot of times these life insurance agents sell this as such a great investment. And this has been around for 21 years and it has just over a $10,000 value. Like, think about that. That's kind of crazy.
If you live to 2,000, you'll be able to retire on this, you know. 2,000 years old, not 2,000. I mean, you're 21 years in, and we have proven mathematically just by the discussion of the numbers that it sucks. And so, not to mention the concept sucks. So, yeah, get $500,000 worth of term insurance. Go to zanderinsurance.com. Shop around. Get you the best quote on that.
Put the beneficiary as a trust for your kids. If you were to die while they're still minors, you probably don't want to leave it to the ex and hope she does a good job with it. No, I think that's a bad plan.
Chapter 8: How can I build a financial safety net during uncertain times?
So just leave it to the kids and the income off of which can be used for their good in replacement of child support or whatever we want to call it. And then, you know, when they're grown and if you're still single at that point and you have no one counting on you at all and you want to drop the policy, that's okay. Like, you don't really need car insurance if you don't have a car.
Right. Well, and hopefully, too, following this plan, your assets and your savings will continue to grow so that if you do end up having a significant other and you want to leave them something, you will have real money saved in your bank account.
Yeah, I think that's a good point. For the rest of you listening, the typical scenario is, let's say you're like a 32-year-old couple and you've got two little kids. Like, how old are you?
I'm not going to admit that on air.
Well, of course you are.
You can't ask that on air.
You make fun of me being 62 every day. So, oh, my God. Okay, you're a young couple with two little kids. I'm going to pretend you're 32. Jeez, I don't even know how old you are. It doesn't matter. But the point being that if something happened to either one, you or your husband today, those kids got to eat from little, from three or four years old, all the way to 18 or 20.
So you need life insurance more at that time because you don't have a big, unless you've got a million dollars in the bank or a million dollars in mutual funds, you need life insurance more at that time than you do at any other time.
I'm over 30. I'll give you that.
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