Her message about whole life insurance is also basic. She says you don’t need it.
In fact, she’s advised people calling into her show for financial advice to fire advisors who have sold them whole life insurance or who are pushing whole life insurance.
“Find yourself a new financial advisor!” -Suze Orman
Whole life insurance is on Orman’s self-labeled “hate list” of investment products. She notes that whole life insurance doesn’t do anything good for most people, but it does line the pockets of the salesperson working on commission.
She explains that the three types of permanent life insurance (universal, whole, and variable) are equally bad investments. Life insurance isn’t supposed to be an investment, she notes. It’s an emergency plan. It’s a financial product you buy, hoping you never have to use it.
“In most instances you really only need life insurance for a finite period of time. Maybe until the kids are adults, or until you’ve been able to save up enough assets that your spouse or other dependents would be able to live off the income from those assets.
That’s why I highly recommend most families only need term life insurance. As its name suggests, it lasts for just a set term. That can be five years, 10 years, or 20 years or more. If you die during the term, the policy pays out a death benefit. Because of the finite length of the policy, term life insurance is incredibly affordable. I guarantee you will be amazed at how much protection you can buy for a very small sum.”
Orman’s audience is made up of regular working people who are learning about personal finance and trying to make the right decisions about their money. She speaks directly to them with her famous tagline, “People first, then money, then things.”
In an article published on her website February 9, 2017, Orman gives this advice:
“Chocolate and roses are classic Valentine’s Day gifts. But I am dead serious when I tell you that the most caring and loving gift you can ever give your loved ones is to protect them with life insurance.
I know, I know. Not exactly romantic. But in terms of material things that we can buy for others, you can’t tell me there is anything that will bestow more protection and peace of mind. Yet a recent survey finds that many parents with children don’t have life insurance. And a significant portion of families that do have insurance, have $100,000 or less of coverage, which I can tell you is way too little.”
She goes on to say that families with children need a death benefit on both parents equal to 20-25 times the annual income it must replace. When the beneficiary[RM2] of this large life insurance policy invests the payout conservatively, it’s possible to live off of the interest payments for a long time.
If buying that much life insurance sounds like an expensive project, consider that a 30-year-old woman in good health could purchase a term life insurance policy worth 750,000 for less than $800 per year. This amount of money protects her family from financial hardship if she dies while her kids are still in school. It gives her surviving partner enough money to pay off the mortgage and all of the household debt, invest the remainder of the payout, and live off the interest payments. It also means that her family won’t have to go into debt to cover her funeral and burial costs.
People buy whole life insurance because it seems like an easy way to force themselves to save money. They get a hybrid product that includes a life insurance component and a savings component. Orman says this approach to money is all wrong.
“You will never be powerful in life until you are powerful over your own money,” she told the 2017 eMerge Americas conference audience. “How you think about it, how you feel about it, and how you invest it.”
Getting a term life insurance policy to protect your family from financial hardship has never been easier than it is right now. The process is simple and straightforward. Answer a few quick questions and you’ll be on your way to owning the type of life insurance recommended by respected financial advisors like Suze Orman.