Oct 27, 2026

Shopping Life Insurance? Dave Ramsey Says Avoid This Option

Permanent coverage sounds like the smarter buy, but Ramsey thinks it’s the costlier mistake.

Life insurance is supposed to be a safety net for the people who’d be left holding the bills if you died. Nobody enjoys thinking about it, which is probably why so many people end up with the wrong policy. The real decision isn’t whether to buy coverage. It’s which kind.

There are two main contenders: term life and whole life. Each has its fans, but personal finance personality Dave Ramsey has a strong opinion. Here’s why he says to skip whole life and go with term instead.

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Why Ramsey Says Whole Life Is a Bad Deal

Whole life sounds great on paper. It’s permanent coverage that lasts your entire life. The problem is the price. According to The Zebra, whole life policies often cost about $3,000 to $5,000 more per year than other policies, depending on the insured’s age and health.

George Kamel, an author and personal finance expert, put it bluntly in an article for Ramsey Solutions: “As great as term life is, it has an evil cousin called whole life insurance.” Ramsey shares that same view.

According to Ramsey Solutions, life insurance has one purpose: to replace your income if you die. Whole life adds complicated investment features, often with poor returns, which makes it a clumsy tool for that job.

What Ramsey Recommends Instead

Ramsey’s pick is level term life. It locks in your premium for a set period and is the most affordable option. If you die during the term, your dependents receive a death benefit.

Kamal recommended aiming for a payout that’s 10 to 12 times your annual income and investing that payout in growth stock mutual funds, which average 10% to 12% per year. The goal is for those investment returns to replace your paycheck when you’re gone.

Both Kamel and Ramsey also suggested skipping whole life and investing the difference. Say whole life would cost you $350 a month, but level term costs $30. That leaves $320 a month to put into a tax-advantaged retirement account.

Term Life’s Pros and Cons

Term life has real advantages over whole life, but it isn’t perfect.

Pros

It’s affordable: Term life insurance is a fraction of the cost of whole life insurance. According to Western & Southern Financial Group, this is because it only covers a specific period and doesn’t build cash value.
It’s simple: Term life insurance isn’t complex. It provides a death benefit if the insured dies during the term.
It has flexible coverage options: Policies vary in length and coverage amounts. You can choose a policy that fits your needs.
It has predictable premiums: Level term life insurance has a fixed premium throughout the term. You pay the same amount every month.

Cons

Only temporary coverage: Coverage is only temporary. Once the term ends, the policy expires. However, Ramsey Solutions noted that you typically need coverage for only 10-20 years while you build wealth and raise kids.
There’s no cash value: There’s no cash value, which means you can’t borrow against the policy or use it as savings.
There’s no return on premiums: If the policyholder outlives the term, you don’t get your premiums back.
It has health-based eligibility: The cost and availability are based on your health and age when you apply.
There’s a risk of policy expiry: If you outlive the policy, it could be more difficult to get new coverage due to your health or age.

Is Term Life the Right Call?

For most people whose families rely on their income, term life is the smart starting point. It’s cheap, straightforward and built for the years when your paycheck matters most. Whether whole life ever makes sense depends on your situation, so compare quotes, figure out how long you need coverage and run the numbers before you buy.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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Written by

Josephine Nesbit

Josephine has covered a wide variety of topics like saving, investing, real estate, loans and retirement. Her work has been featured in national outlets, such as Rocket Mortgage, U.S. News & World Report, Homes.com and more, where she focuses on helping consumers understand how financial choices affect their long-term goals.

Edited by

Ashleigh Ray

Ashleigh is an editor specializing in personal finance and banking content, with four years of experience — first at GOBankingRates, then at MoneyLion — turning complex financial topics into advice readers can actually understand and use. She holds an MFA in Creative Writing from the University of South Florida and brings that same care for clarity and voice to every piece she edits. She's based in Tampa, Florida.