Why Dave Ramsey Says You Don’t Have to Increase your Life Insurance When You Get a Raise


The first thing many people assume is that when they get a raise at work, they need to up their life insurance policy. But personal finance expert and budget guru Dave Ramsey says that is not always the case.

In fact, sometimes it might be better for you to wait and use that money elsewhere. Increasing your life insurance isn’t always the right move.

When Did Dave Ramsey Say That?

In Ramsey’s personal finance column, a woman wrote in asking if she should raise her life insurance. She and her husband have no debt, a solid emergency fund, and they were trying for a baby. She just received a raise of $10,000.

With this raise, she asked Ramsey if they should up her life insurance policy. She and her husband both have 20-year term life insurance policies, and their coverage currently equals 10 times their individual income – that means if she makes $100,000 before her raise, her life insurance policy will pay out $1 million.

What Dave Ramsey Said to Her

Ramsay’s exact words were, “I think you’re OK right now”, which is probably reassuring to the soon-to-be mother and her husband.

Ramsey also says that while 10-12x your income for life insurance is a great starting point for many people, and the beginning place he always recommends, he actually believes that this number is just that – a starting point. And you can adjust and change as you build your personal finance empire and change your budget.

Why Dave Ramsey Says 10x Your Income for Life Insurance Is Just a Suggestion

Ramsey points out that as you become more financially secure, your need for a larger life insurance policy actually goes down, not up.

He encouraged the reader to consider their expenses and needs. If she or her husband passed tomorrow, how much money would the other actually need? Do you have enough to cover final expenses and any debt or immediate financial worries? If so, there’s no need to up your life insurance even as your budget or income increases.

Instead, he recommends that you reevaluate your needs every three to four years. Does your current life insurance plan match up to your needs? Will your family be protected and covered in case something terrible happens?

If the answer is still yes, you can put that extra money into other places.