Term Insurance vs. Universal Life Insurance – Dave Ramsey Is Selling Getting Out of Debt – September 24, 2023

Buy Term invest the difference is the mantra you get from a lot of people peddling term insurance, and if you’re their TARGET market, they’re right to peddle this message to you, but if you’re like me and you want to do what the government and other financially successful people are doing, term insurance is silly.

First and foremost, permanent insurance, which includes whole life, term-to-100, and universal life insurance, was created because TERM insurance fails to address PERMANENT insurance needs. The main reason term premiums(monthly or annual payments) are so low is because the insurance company is banking on you living past the TERM of your insurance policy.

The more healthier you are, the lower your term insurance premiums are, but one day you’re no longer INSURABLE, and if you’re not as rich as Dave Ramsey thinks you should be, when this time comes, this is when you and you’re screwed.

When you have a permanent insurance policy, you can pick up a substance abuse problem, and the insurance company can’t decline you or even qualify you. The higher premiums you pay for PERMANENT insurance give you advantages term insurance folks will never have.

It’s not to say that term insurance shouldn’t be considered, but you’d have to be an idiot to pick term insurance if you can afford the universal insurance, why? Because universal INSURANCE PREMIUMS CAN decline AS YOU AGE.

How Universal Insurance is supposed to work in THEORY is that the longer you have the policy, the more SELF-INSURED you become, the problem with term insurance is actually the GOVERNMENT, which doesn’t like it when REGULAR people use it for tax savings.

The only reason the government doesn’t ban universal insurance is because most BANKS, large organizations, politicians, and rich people in general use universal insurance, and if the government cuts it off, the GOVERNMENT will miss out on a lot of tax revenue that often goes offshore.

Insurance companies CAN NOT PRINT MONEY, and Insurance companies are the biggest taxpayers in the world because insurance can’t print money like banks, the money they do have is the result of private money circulating in the market.

Well-run Insurance companies are even solvent under a GOLD STANDARD, whereas in a Gold Standard, banks usually go bankrupt, one of the main reasons for central banks and fiat money has to do with propping up the banking sector, whereas the insurance market sector, which can inflate and deflate with the market can only be destroyed via HYPERINFLATION.

In the insurance market if the government does something stupid, the insurance sector will stop selling a certain product, or it will completely restructure it. In Canada, as an example, the province of British Columbia decided that it was a good idea to nationalize the auto insurance market, meaning that the government runs the auto insurance market and within 40 years, B.C. has the most expensive auto insurance rates in the nation.

Now, the delay for that to happen only took so long, because politically, the politicians wanted to get reelected, so instead of being honest, they merely passed the ever-increasing OPERATING costs onto the taxpayer, but in time the price had to go up because there was no auto insurance MARKET in B.C. and the operating costs were getting too expensive.

Remember that if the government is running the insurance market, everything is politicized so insurance claims that shouldn’t be paid out are paid out, employees that should be paid based on COMMISSIONS are instead paid a guaranteed wage.

In the life insurance industry, if you’re not performing, you’re fired, but if the government is running the insurance industry, chances are there is a multiple-stage process to get rid of an employee that’s clearly a liability to the organization.

I bring this up because even with TERM insurance, there can be inefficiencies if the wrong people are in charge of an insurance company. Term Insurance, for the most part, makes insurance companies the most money. I’m not only referring to term life insurance, I’m referring to TERM insurance in general.

If you pay your term auto insurance for the year and you get into ZERO accidents, you basically paid the insurance company for a service they never had to fulfill. With PERMENENT Insurance, as long as you pay the premiums, the insurance will eventually have to give you SOMETHING.

Even if you cancel your universal life insurance policy, you get some money back, and often, the money you get back would equate to the money you would have WASTED on term insurance.

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When you see Universal Life Insurance the way I see it, term insurance really sucks. The concept behind universal life insurance is to be SELF-INSURED, so the less risk the Insurance company has to pay you, the cheaper your insurance becomes, but it gets better, because not only can you BORROW money from universal life insurance, you can also use it as LEVERAGE to purchase other assets.

Universal Life Insurance is PERMANENT insurance meaning that you can use if for ESTATE PLANNING. Now, estate planning is a topic all on it’s own that I will not be writing about in this post because it has so many derivatives and variables, and estate planning is based on the goals and objectives of the life insured.

But it’s the estate planning component that brings your universal life insurance policy to life, because this is how and why individuals, businesses, and legal entities use your universal life insurance for their day-to-day needs, and just so you’re aware, the government gets a lot of revenue because of Univeral policyholders, who now have access to capital they otherwise wouldn’t have if they had a term insurance policy.

This is the symbiotic relationship of universal life insurance and all the parties involved. Now, you might say, why would you take a universal policy to pay more fees and taxes? And the answer to that is simple: LEVERAGE. Dave Ramset sells people on getting out of debt, whereas universal life insurance revolves around LEVERAGING debt.

When you pay your term insurance premiums and invest the difference, that money is GONE until it’s time to retire, and make no mistake about it, Uncle Sam or whoever you pay your taxes to, wants their cut. Whereas those of us using universal life insurance pay Uncle Sam NOW instead of later.

This is hard to comprehend until you understand that the goal of universal life is for your INVESTMENTS to pay off your life insurance. Meaning let’s say I take out a universal life insurance loan and pay 5% to service that loan, but my investments are paying 11% minus the fees the insurance company charges(which are also taxed) and you see how all parties involved benefit, because when people do this, the government as an example gets the money it would never get otherwise.

Furthermore, the money borrowed is used to stimulate economic growth in the economy and also serves as a benefit to the government, and the universal life insurance policyholder who is still insured has access to capital, has leverage, and has prepared their estate for the inevitable transition to the afterlife.

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With that said, universal life insurance isn’t for everyone, so Dave Ramsey is within his rights to warn people about it because if you, as an example you use your universal policy to take a vacation, I’d argue this is silly. If it’s a vacation for BUSINESS or estate planning purposes, it’s smart, but if you’re wasting your universal life insurance policy on nothing, then Dave Ramsey is right to say buy term and invest the difference.

Interesting times ahead!