Which insurance does Dave Ramsey recommend?


Editorial team Published on

Dave Ramsey's insurance advice focuses on using insurance strictly to protect your wealth and income from catastrophic loss, rather than as an investment tool.

The 8 Essential Types of Insurance

Ramsey outlines eight non-negotiable insurance policies to cover major financial risks:

  1. Term Life Insurance: Buy 10 to 12 times your annual income in a 15-to-20-year level term policy. Avoid whole life or cash-value insurance completely.
  2. Auto Insurance: Carry high liability limits (at least $500,000) and comprehensive/collision with a high deductible ($1,000).
  3. Homeowners or Renters Insurance: Ensure you have guaranteed or extended replacement cost coverage with a high deductible. Skip home warranties and use your savings for repairs.
  4. Health Insurance: Choose a high-deductible health plan paired with a Health Savings Account (HSA).
  5. Long-Term Disability Insurance: Cover 60% to 70% of your income to protect your earnings if you cannot work.
  6. Long-Term Care Insurance: Essential as you age, typically recommended starting around age 60.
  7. Identity Theft Protection: Focus on policies that offer white-glove restoration service and strong recovery funds.
  8. Umbrella Insurance: Add a $1 million+ personal liability umbrella policy once your net worth exceeds $500,000.

Core Strategies

  • Maximize Deductibles: Set deductibles (auto and home) as high as your emergency fund can comfortably handle ($1,000+) to lower monthly premiums.
  • Self-Insure Small Losses: Pay for minor fender-benders or household repairs out of pocket rather than filing small claims that spike your rates.
  • Avoid Cash-Value Life Policies: Invest the massive price difference of term versus whole life insurance into growth stock mutual funds instead.

You can review specific action plans or check your coverage using the Ramsey Insurance Guide.