Dave Exposes Crappy Life Insurance Products

Summary

Ramsey Everyday Millionaires: Dave Exposes Crappy Life Insurance Products

Episode Title: Dave Exposes Crappy Life Insurance Products
Host/Author: Ramsey Network
Release Date: May 30, 2025

In this impactful episode of Ramsey Everyday Millionaires, Dave Ramsey delves deep into the pitfalls of certain life insurance products, particularly those marketed as investment opportunities. Through a compelling caller story and an insightful discussion on the insurance industry's practices, Ramsey offers listeners valuable guidance on safeguarding their financial well-being.

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1. Caller Story: Lynn’s Experience with Life Insurance

[00:17] Lynn, a listener from Columbus, Ohio, shares her troubling experience with a flexible premium adjustable life insurance policy:

Lynn: "I lost my husband about two and a half years ago... I was talked into a flexible, premium, adjustable life. I am too now... they send me a paper telling me where this money's going to. And that's when I started looking into it. I pulled you up on YouTube and did my homework and you told me to get rid of it."

Lynn explains that after her husband's passing, she transitioned their 401(k)s into an IRA and was persuaded to invest in a life insurance product. Upon receiving detailed paperwork about the investment, she grew suspicious and sought Ramsey's advice, leading her to cancel the policy.

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2. Dave Ramsey’s Guidance on Managing Investments

Responding to Lynn’s concerns, Dave Ramsey provides clear and actionable advice:

[01:54]

Dave Ramsey: "You have your money all after your husband passed away with a life insurance company. And you need to move it to an investment company, someone to help you do actual investments, not buy insurance."

He emphasizes the importance of transferring funds from insurance companies to reputable investment firms to ensure better management and lower fees.

[02:08]

Dave Ramsey: "Jump [e-mail] and get with a Smartvestor pro... They can teach you what you're buying and you'll be comfortable with it and you're going to get just unbelievably lower fees and much better quality investments."

Ramsey reassures Lynn that working with certified investment professionals will provide transparency and protect her from predatory insurance practices.

[02:53]

Dave Ramsey: "They just... took a widow to the cleaners. They should be ashamed of themselves."

He condemns the unethical behavior of some insurance companies that exploit vulnerable individuals, particularly widows, by charging exorbitant fees and offering subpar products.

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3. The Connection Between Insurance and Investments

The conversation shifts to a broader discussion about why insurance products are often misrepresented as legitimate investments.

[04:43]

Unknown Speaker: "Now, how is it that insurance somehow became synonymous with, like, I'll put investing in air quotes and, like, financial planning?"

Dave Ramsey provides a historical and regulatory perspective:

[04:58]

Dave Ramsey: "People that have not passed their securities exam, they're not licensed to sell securities. And so they sell insurance products and call them investments... most states the real estate license is a joke and the insurance license is a joke."

Ramsey criticizes the ease with which individuals can obtain insurance licenses compared to the rigorous securities licenses, leading to the proliferation of misleading investment products bundled with insurance.

[05:11]

Dave Ramsey: "They sell insurance products as investments because they haven't passed the same tests. The Securities and Exchange Commission regulates the Smartvestor pros. They do not regulate whole life life insurance agents that call themselves investing brokers."

He underscores the lack of stringent regulation for insurance agents, making it easier for them to misrepresent products as sound investments.

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4. Evolution of Life Insurance Products

Dave Ramsey provides an in-depth look at the evolution of life insurance products and their impact on consumers:

[05:18]

Dave Ramsey: "Originally, life insurance was sold as term... premiums went up every single year... They started selling a 10-year level term to improve persistence."

He explains how insurance companies shifted from traditional term life insurance, which often leads to high cancellation rates due to annually increasing premiums, to more stable and profitable products that ensure long-term client retention.

[08:17]

Dave Ramsey: "They added the investment side to it to make it feel like you're owning instead of renting, and they started selling that crap. And then they figured out they make so much money on that that they build tall buildings with..."

Ramsey concludes by highlighting the deceptive nature of these combined insurance-investment products, which prioritize company profits over clients' financial health.

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5. Notable Quotes

Throughout the episode, several poignant statements underscore the risks associated with certain life insurance products:

• Lynn: "I was put into these insurance products, and it scares me because if they're willing to do this to you on the investment that you put in the flexible premium and rip you off there, I'm worried about what they're doing with the 401k then." [03:22]

• Dave Ramsey: "They just keep sucking the blood out of everything that's money and give it to my grandkids." [04:15]

• Dave Ramsey: "You can tell if someone has no mutual funds, if they cannot sell you a mutual fund, they're not securities licensed." [05:19]

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6. Key Takeaways and Insights

• Vigilance Against Predatory Products: Consumers must thoroughly research and understand financial products, especially those that seem too good to be true or are sold under the guise of investment opportunities.

• Importance of Proper Licensing: Ensuring that financial advisors and products are regulated and licensed appropriately can protect investors from fraud and poor financial decisions.

• Shift to Reputable Investments: Transitioning funds from dubious insurance products to well-regarded investment firms can lead to better financial outcomes, lower fees, and greater peace of mind.

• Awareness of Industry Practices: Understanding the history and tactics of the insurance industry can help consumers recognize and avoid manipulative sales practices.

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Conclusion

In this episode, Dave Ramsey effectively exposes the questionable practices within the life insurance industry, particularly those that masquerade as investment opportunities. By sharing Lynn’s personal story and providing a comprehensive analysis of the industry's strategies, Ramsey empowers listeners to make informed financial decisions, avoid unnecessary debt, and invest wisely. The episode serves as a crucial reminder of the importance of due diligence and seeking trustworthy financial guidance.

Transcript

[Dave Ramsey]

This episode is brought to you by Smartvestor. Connect with an investing pro near you at ramseysolutions.com Smartvestor Lynn is in Columbus, Ohio. Hi, Lynn, how are you?

[Lynn]

Hi. I'm so excited to talk to you.

[Dave Ramsey]

Well, you too. How can we help?

[Lynn]

Well, I wrote in because what started this questionnaire is I was talked into a flexible, premium, adjustable life. I am too now. I lost my husband about two and a half years ago and we've always had money with Western and Southern. And I have another account. I had my Both of our 401ks turned over into an IRA and I had to start pulling out. And he said, you know, for tax purposes, I could put it into this. And at that point, you know, I just put all my grandkids, which I have 12, and put them all on it, thinking that later on down the road. Well, what made me a little upset is they send me a paper telling me where this money's going to. And that's when I started looking into it. I pulled you up on YouTube and did my homework and you told me to get rid of it. And so I'm hoping, I'm in the process now of shutting it off. You know, just from what you've taught me now that I've been watching YouTube and listening to you for years and my husband listen to you. So.

[Dave Ramsey]

You have your money all after your husband passed away with a life insurance company. And you need to move it to an investment company, someone to help you do actual investments, not buy insurance.

[Lynn]

Yeah, I've got, let's see, I've got one. It's like a money market or whatever annuity. I'm not even.

[Dave Ramsey]

The guys that you're dealing with are insurance people. Okay, you need to go just jump [e-mail] and get with a Smartvestor pro. Some folks in the actual investment world. Yeah.

[Unknown]

Because those guys.

[Dave Ramsey]

Yeah, they can teach you and they're not going to jerk you around with this. They can teach you what you're buying and you'll be comfortable with it and you're going to get just unbelievably lower fees and much better quality investments.

[Lynn]

Oh, I was very upset when I seen the flexible and I just.

[Dave Ramsey]

They just. They took a widow to the cleaners. They should be ashamed of themselves.

[Lynn]

I'm pretty well set money wise. And you know, I really don't have to touch my 401k right now or at all. And it's not with them, right? Yes, it is.

[Dave Ramsey]

Yeah. Move it.

[Unknown]

Oh, gosh.

[Lynn]

Yeah.

[Dave Ramsey]

I would move everything to a good. To. To a good financial planning firm that does actual investments, that does not sell insurance.

[Lynn]

Okay.

[Dave Ramsey]

That's what you need. And you're. Because you're. You're being put in these insurance products, and it scares me because if they're willing to do this to you on the investment that you put in the flexible premium and rip you off there, I'm worried about what they're doing with the 401k then.

[Lynn]

Well, they're saying they're taking it out of my 401k to pay for it.

[Dave Ramsey]

And we're about to stop that. When you cancel this.

[Lynn]

Yeah, immediately. I just. I just did yesterday.

[Dave Ramsey]

Good.

[Lynn]

And then from listening to you, and then when I was reading, you had taught me that. That it just doesn't stop. Like, if I would get sick.

[Dave Ramsey]

Right.

[Lynn]

My kids are gonna have to keep paying for it. And I was like, it's. No, it's not just.

[Dave Ramsey]

It just keeps sucking the blood out.

[Lynn]

Of everything that's money. And give it to my grandkids. Now.

[Dave Ramsey]

You don't have to give it to them now. You can just put it in a good investment where it's not. Where you're not being screwed over. That's all you're doing. So, yeah, just go to ramseysolutions.com and click on SmartVestor. Pick out a SmartVestor Pro in your area. Pick out two of them, Go sit down, interview them, tell them your story, and get a sense of how you feel about the air in the room with the person you're meeting with. Because you now know what a skunk smells like, and so you know how to stay away from skunks.

[Unknown]

Now, how is it that insurance somehow became synonymous with, like, I'll put investing in air quotes and, like, financial planning? Like, I. I can't understand how those two got linked together because.

[Dave Ramsey]

Well, the. The. The history lesson is one thing, and then the current state is another. The current state is that people that have not passed their securities exam, they're not licensed to sell securities.

[Unknown]

Exactly.

[Dave Ramsey]

And so they sell insurance products and call them investments. Because an insurance license is like taking. I mean, a sixth grader can pass.

[Unknown]

That's what I'm saying.

[Dave Ramsey]

But to pass your Series 63 or your Series 7, to be able to sell. Which I passed, and I dropped the licenses, but. Because I don't want to be regulated on my opinion here on the air. But anyway. But the. Those are more like taking a CPA exam. That's like a real exam. You have to study and actually know what the flip you're doing and that kind of stuff there. But I mean most states the real estate license is a joke and the insurance license is a joke. I took my real estate license in 27 minutes in 1978 and I made a 94, you know, I mean, and I was 18 years old. That's how lame Tennessee's licensing for real estate was at that time. It's a little tougher now, but not a lot. Not compared to securities license. That's the modern day answer as to why they do that. But you can tell if someone is, if they have no mutual funds, if they cannot sell you a mutual fund, they're not securities licensed. If they only need a mutual fund, they can sell you inside of an insurance policy. They're not securities licensed. And so that means that they haven't passed the same tests. And it means that they're not regulated by the same bodies. Securities and Exchange Commission regulates the smartvestor pros. They do not regulate whole life life insurance agents that call themselves investing brokers, which they're not. Okay. So the long term history though is life insurance originally was sold as term. It was sold as what's called art, annual renewable term. So once a year you got older. So your statistical probability of death was higher. So your life insurance premium was higher once a year. So your life insurance premiums went up every single year. And that's a pure statistical insurance policy. It's the most pure there is. Okay. Then they figured out that what they call persistence in the insurance world, which persistence means when an agent writes a policy, how long does it stay on the books? If it is a persistent, if it's got good persistence, it stays on the books a long time and you make good commissions over a long period of time. If it's not got good persistence, it turns over. Well, guess what? If you get a bill every year and every year it goes up, your probability of canceling is very high. So the arts had and have horrible persistence. They don't stay on the books. So they got to go sell them again. They got to go sell them again. They got to go sell them. So they figured that out early in the life insurance game, back when it first started and then they started saying we'll take the average of the 10 years and charge you a 10 year level. So it's higher the first year, you know, and somewhere around year five it would cross in the middle. But the persistence is better because you have this. Your rate never goes up. So you have no emotional activation to cancel. And so they were able to lower the price. So the 10 year is lower than the average of 10 arts.

[Unknown]

That's right.

[Dave Ramsey]

And so that's. Then they added the investment side to it to make it feel like you're owning instead of renting, and they started selling that crap. And then they figured out they make so much money on that that they build tall buildings with.