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Your Money: Base term life insurance purchase on your current income

Dave Ramsey: Buy term life insurance coverage of about 10 to 12 times their annual income
BY DAVE RAMSEY, For The Oklahoman Published: February 11, 2013
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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

Email questions for Dave Ramsey to davesays@daveramsey.com.


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