Dave Ramsey vs Indexed Universal Life–5 Claims Debunked

What are Dave Ramsey’s thoughts on Indexed Universal Life Insurance (IUL)? David debunks the 5 myths presented in Dave Ramsey’s article on why you should run away from IULs.

Myth #1: IULs never perform to their full capacity because the cash portion of the portfolio gets eaten up by the super-high fees.

Yes, the fees will be higher at the start of the program but will reduce dramatically the longer you keep the policy. In fact, when you average the fees over the entire program, the costs translate to less than 1% of your balance per year.

Myth #2: IULs contain numerous fees ranging from surrender charges, administrative charges, premium expenses, etc. 

David explains that IULs only work if you keep them for life – so fees should only be calculated after the contract expires, which often translates to 1% per year.

Myth #3: When you cancel your insurance policy, you give up your death benefit and almost all the cash value you’ve managed to build.

For David, this is by far the most ridiculous of all Dave Ramsey’s claims on IULs. Not only is it misleading, but it is actually opposite to how cash-value life insurances work.

Myth #4: Excessive fees keep returns relatively low, so your IUL will never beat inflation. 

This claim is just ridiculous, considering IULs were never designed to be a substitute for the stock market portion of your portfolio.

Myth #5: Market performance will affect your premiums – the higher the rates, the more likely you are to lose your policy.

According to David, this is a careless and poorly researched claim. Here, Dave Ramsey’s primary goal is to lead you to strategically positioned links inviting you to buy term life insurance from him. 

David believes the only reason Dave Ramsey is against IULs is that he wants you to drop your IULs in favor of his term life insurance policy, with no regard to the losses you might incur or where you are in the surrender period.



Mentioned in this episode:

David’s books: Power of Zero, Look Before Your LIRP, The Volatility Shield, Tax-Free Income for Life and The Infinity Code


PowerOfZero.com (free video series)

@mcknightandco on Twitter 

@davidcmcknight on Instagram

David McKnight on YouTube

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