Dave Ramsey says: Life insurance is not a baby step

Aug 29, 2023, 1:00 PM

Man holds baby in loving manner...

(Pexels Photo)

(Pexels Photo)

Dear Dave,

I just discovered you and your teachings a couple of weeks ago. I’m already on Baby Step 2, and I was wondering if I should buy life insurance now or wait until I’ve finished paying off debt. I’m single with no children, and I owe asuelen.ri total of $44,700. I have a $25,000 company-funded life insurance policy through my employer. What do you think I should do?

— Elizabeth

Dear Elizabeth,

If you have a life insurance need, it’s not a Baby Step. It’s a necessity in your budget and something you need to put in place as soon as possible. But from what you’ve told me, you don’t have a great need for life insurance at this point. No one, except you, is depending on your income, and the $25,000 policy you have through your employer is more than enough to take care of any final expenses if something happened to you.

The main purpose of life insurance is to take care of those you leave behind when you die. If someone is financially dependent on your income, I recommend having 10 to 12 times your annual income wrapped up in a good level term life insurance policy. That means if you make $80,000 a year, you should have a policy worth anywhere from $800,000 to $960,000.

If I were you, I wouldn’t buy another life insurance policy at all right now. If you get married or have kids somewhere down the road, then buy it immediately. In that case, both you and your spouse should have 15- to 20-year level term policies of 10 to 12 times your individual incomes.

And never buy anything except level term life insurance. The reason? That covers you until you’re out of debt—should a spouse bring some into the picture—and the two of you have so much cash piled up that you don’t need to pay for a life insurance policy anymore. It’s called being self-insured, and that’s a great place to be.

Good question, Elizabeth!

— Dave


Dave Ramsey

Couple sits at table, seemingly planning out life....

Dave Ramsey

Dave Ramsey says: My wife thinks she owes me money

Struggling with financial tensions in marriage? Dave Ramsey offers insights on overcoming guilt and building a united front in managing debt.

2 days ago

Woman seeks financial support from father...

Dave Ramsey

Dave says: Work together, and increase expectations gradually

There are ways we can support our children financially without completely pulling the rug out from under them. Here are tips from Dave Ramsey.

4 days ago

(Pexels Photo)...

Dave Ramsey

Dave says: If you’re not going all in, stay out

Think twice before diving into that new business venture! Success requires a hefty 40-50 hours a week commitment.

9 days ago

(Pexels Photo)...

Dave Ramsey

Dave says: Seeking mediation with a neutral third-party advisor”

If someone close to you is having financial problems with their spouse, it might be best to refer them to a marriage counselor rather than insert your own advice.

11 days ago

In this week's article, Dave Ramsey talks about when to buckle down and climb out of that financial...

Dave Ramsey

Dave says: Getting out of a big mess doesn’t always feel good, but it’s necessary

Getting yourself out of a financial big mess doesn't always feel good, but sometimes, it's necessary to get back on track.

16 days ago

People sitting at a table, looking upset about bills....

George Kamel

The normalization of debt: How it happened and why it’s keeping you broke

The financial systems we trust benefit from our struggles. Break free from the cycle and rethink your financial game plan.

18 days ago

Sponsored Articles


Midwestern University

Midwestern University Clinics: transforming health care in the valley

Midwestern University, long a fixture of comprehensive health care education in the West Valley, is also a recognized leader in community health care.


DISC Desert Institute for Spine Care

Sciatica pain is treatable but surgery may be required

Sciatica pain is one of the most common ailments a person can face, and if not taken seriously, it could become one of the most harmful.


Sanderson Ford

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

Dave Ramsey says: Life insurance is not a baby step