Posted on 02/05/2013 4:04:33 PM PST by Kaslin
Dear Dave,I’m looking at buying term life insurance. Currently, I’m in medical school doing my last year of residency and making $35,000 a year. Should I base the amount of insurance coverage on what I’m making now or what I’ll make when I’ve finished medical school?
Amanda
Dear Amanda,
In most cases, I advise basing the amount of life insurance coverage on the income you’re earning at the moment. After all, that’s the amount your family is used to living on, right? However, if you’re finishing up your medical degree this year, it’s a virtual certainty you’ll earn lots more in 2014. You could easily go from making $35,000 to $135,000.
I recommend that people buy term life insurance coverage of about 10 to 12 times their annual income. Considering your situation, I’d say you could afford to buy a little potential. Instead of basing it on your current $35,000 income and buying a policy in the $350,000 to $400,000 range, you might double that amount. It will still be really cheap coverage as long as you’re in decent health. And once you’re making doctor money you can adjust the amount of coverage according to what you actually make.Good luck, Amanda!
—Dave
Dear Dave,My wife and I were recently involved in an auto accident, and the insurance company doesn’t want to cover the damage due to a technicality. We both work, so I’d like to find a replacement car while we fight this out with the insurer. However, we only have $7,000 in savings and we don’t want to spend it all. What should we do?
John
Dear John,
You can definitely find your wife a good used car for what you’ve got in the bank. However, leaving yourselves with no savings whatsoever is not a good plan.
I realize no one enjoys driving a beater, but that’s what I’d do right now. Just look at it as a rental car. If you spend $1,500 on a little used something, you will have $5,500 left in your savings account. Just act as your own insurance company for a while. Then, when the big guys pay up, you could just plug it back into your savings account. Even if they don’t pay, you’ll still have a nice chunk of change sitting there. And it wouldn’t take long to save up enough to upgrade that little hooptie to something nicer and more reliable while still keeping the majority of your savings intact!
Dave
I wonder how much Amanda will be making in 10 yrs when Obamacare is in full stride and the immigration door is wide open for 3rd world “physicians” ?
Amanda. Do not buy term insurance.
It is never paid off and gets more expensive and less value as you grow old.
If Dave writes things titled “Dave Says” then he’s about an arrogant puke that needs punched in the mouth.
Something fishy about Amanda’s letter. Medical students graduate from medical school and THEN become interns (post graduate 1). After internship, they do residency (post graduate 2 through n, with n being the total number of years in that specialty’s residency. So, if she’s a resident, she’s not in medical school. If she’s in medical school, then she CAN’T be a resident.
Something fishy about Amanda’s letter. Medical students graduate from medical school and THEN become interns (post graduate 1). After internship, they do residency (post graduate 2 through n, with n being the total number of years in that specialty’s residency). So, if she’s a resident, she’s not in medical school. If she’s in medical school, then she CAN’T be a resident.
Never be worth more dead than alive.
I disagree - always buy TERM Insurance and invest the difference (betw. Term and Whole Life).
You’re completely wrong. Virtually all residency programs are within medical schools. Her “boss” would be the head of a medical school department and his/her boss would be the dean of the medical school.
blah, blah, blah, blah, blah
The fact is, insurance is an expense, not an investment. Any psychopath who tries to sell you life insurance as an investment needs to be tied down and staked out on a colony of fire ants on a hot day in Texas.
Amanda. Do not buy term insurance.
It is never paid off and gets more expensive and less value as you grow old.
Term insurance is not a forever thing, hense the name term, you are only in need of it for a short term. It is in no way to be a replacement for a whole life, investment, mutual fund, retirement fund. I have enough to keep my income at its current level, if anything were to happen, my wife could invest it and replace my annual income with the interest it earns. Now, when the kids are out of college and we have no mortgage, we cancel the term policy - we don’t need it anymore. Term life insurance is not wealth building tool, but an income protection tool.
2003 Chevy Cavalier here. Love that car. No debt either.
Bullsquat.
My truck was bought new 20 years ago. I stay on top of the brakes, tires, wipers, safety things, etc.
It's ugly, long paid for and I know it inside and out. Speak for your self, Dave.
John opens with: “My wife and I were recently involved in an accident”
Dave begins his response: “You can definitely find your wife a good used car”
Did I miss something or is Dave Ramsey a Sexist @$$hat?
It is never paid off and gets more expensive and less value as you grow old.
....ah Cyclone, Venturer is right, at her age, the term will expire when she can’t afford to replace it. If you die will your wife be fine with 1% interest and 40% market losses like in ‘08? Whole life never goes away, never costs more and at her age if she buys it from a quality dividend paying mutual company it will pay tax free return of premium at retirement time. Less than 3% of term policies ever pay off... don’t rent the insurance until its unaffordable, own it and let it compound!
ymmv
Sorry, you are in error. The medical school attending physicians may run the programs, but the residents (post graduates) are selected by the medical school department heads, but they are HIRED AND PAID BY THE HOSPITALS. I have worked at medical schools in my past life for more than 10 years. The medical school clinical staff train the residents, but they are no longer medical students. There are also hospitals that are NOT associated with medical schools that will hire residents and not all medical schools have their own hospitals. Also, keep in mind that once a medical student graduates from a medical school, they ARE PHYSICIANS and can practice medicine legally, as long as they have applied and received their state license. They do NOT have to wait until they complete their internship or residency to practice medicine. In fact, most interns and residency get 2nd jobs providing after-hours/weekend coverage at smaller community hospitals or doctors offices.
Dave Ramsey Ping!
Dave Ramsey ping
“Whole life insurance is the payday lender for the middle class.” -Dave
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