Dear Dave,

My husband and I had our first child in December. We bought a house not long before the baby was born, and since then we’ve been getting mail and phone calls about buying mortgage protection insurance. We’re both 27, we have good jobs, and our mortgage is $105,000. Would it be a good idea to get this insurance?

— Rachel

Dear Rachel,

Mortgage insurance is really nothing more than a life insurance policy with the word “mortgage” stuck on the front. They make it sound like a specialised product, and they jack the price up. The truth is it’s just a big rip-off in most cases.

If you two are healthy, you both could easily get $250,000 on 20-year level term life insurance policies, for around $12 a month. Then, if something happened to one of you, the other could pay off the house with the insurance money and still have a nice chunk left over.

However, I recommend going a little further. My advice is for each of you to get good, level term life insurance — not just to cover your mortgage — but for ten to 12 times your annual incomes. Both of you should have sensible plans in place to take care of your family now, and in the future, should something unfortunate happen.

And congratulations! God bless you two and your new baby!

— Dave

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Dear Dave,

I was thinking about putting my emergency fund savings into a balanced mutual fund. Would this be a good idea?

— Trey

Dear Trey,

You should never put your emergency fund into anything that can go down in value, or anything that charges penalties for early withdrawals. I recommend putting it into a good money market account with cheque-writing privileges.

Remember, your emergency fund is insurance. It is not an investment. That three to six months of expenses you’ve saved has one purpose and one purpose only — to protect you, your family, and your stuff against the unexpected. You know how Murphy’s Law says anything that can go wrong, will go wrong? Think of your emergency fund as Murphy repellent.

That’s one of the reasons an emergency fund is so important. If you don’t have one, and something unexpected happens, you’re likely to end up borrowing money from the bank, or cashing out retirement savings to fix things. So, don’t worry about investing this money. Just park it, and think of it as an insurance policy for when Murphy comes knocking at the door!

— Dave

• Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey