Life Insurance while unemployed?

[SueInBoston]

Interested to know what forum members thoughts on paying for life insurance while unemployed?

I was unemployed back in 2008 for a year and I let my life insurance lapsed back then, we just didn't have the money for it. Luckily I'm still here.

My next door neighbor died suddenly in January at age 53 from flu and pneumonia. (perfectly healthy guy, went to gym regularly, etc. totally unexpected) He was unemployed for about 6 months and had let his life insurance lapsed. His wife is furious that he made that decision. (other issues too that I won't go into here)

So I'm curious to know what the common sense is in that situation?

[TexasHusker]

The answer depends on a lot of things, starting with the premise that life insurance is intended to insure your loved ones if you die. If you are the household' primary breadwinner, and you have dependents, then life insurance is important. If you died, the proceeds would hopefully provide the kids sufficient funds to reach adulthood, keep the family home, etc.

HOWEVER, if you do not have dependents, life insurance starts decreasing in importance. I have $2 million on me, but once my kids are grown I will drop it because there is no one that I need to protect - my wife would still have plenty of assets.

Unless you have something other than term life, the premiums are generally dirt cheap. So I am wondering what sort of life insurance your friend had. For sure, If you have whole life, you are paying many times what is required to insure your life.

These policies are sold as investments, but they are poor ones. If you have whole life, consider cashing out of it, buying cheap term, and utilizing what is left to live on until you find work. That would have been my advice for your friend.

P.S. Flu and pneumonia still kill people.

[~bs]

The answer depends on a lot of things, starting with the premise that life insurance is intended to insure your loved ones if you die. If you are the household' primary breadwinner, and you have dependents, then life insurance is important. If you died, the proceeds would hopefully provide the kids sufficient funds to reach adulthood, keep the family home, etc.

HOWEVER, if you do not have dependents, life insurance starts decreasing in importance. I have $2 million on me, but once my kids are grown I will drop it because there is no one that I need to protect - my wife would still have plenty of assets.

Unless you have something other than term life, the premiums are generally dirt cheap. So I am wondering what sort of life insurance your friend had. For sure, If you have whole life, you are paying many times what is required to insure your life.

These policies are sold as investments, but they are poor ones. If you have whole life, consider cashing out of it, buying cheap term, and utilizing what is left to live on until you find work. That would have been my advice for your friend.

P.S. Flu and pneumonia still kill people.

I was thinking along the same terms of texashusker.

like he said, depends on the policy, but usually the premiums are really cheap. And whatever conditions made you decide to get life insurance in the first place likely still exist when you are unemployed, so it makes sense to continue paying the premiums if you can afford it.

[creditcardfree]

I'd definitely keep life insurance while unemployed. I'd cut out a lot of other things before I would let that lapse. It could be more expensive to buy later, too.

[disneysteve]

No way would I drop life insurance just because I was unemployed. That would be incredibly stupid. Term life is dirt cheap.

[GoodSteward]

I agree with everybody else. You wouldn't dare drive without auto insurance, life insurance should be just as important to you. Just because it isn't against the law to not have it (like car insurance), it is just as important to your family as your car insurance is to the bank. Term is so cheap you can easily redo a policy if you need to cut back, but that should only be the case if you have a very high payout term like Texas. 150k or 200k even at his age for a 10-year term would have been ~$30 a month(just a guess from what I saw with the company I was with).

In fact, the life insurance I personally own will work with you and adjust it down if needed. You can't go up without another physical, but you can go down if you want.

As a side note, this is ANOTHER reason I can't stand whole life. People have to pay way too much for what little coverage you get. Term is the only thing you need for the purpose of life insurance, which is protection. If you want to add on a whole life later as an "investment" fine, but don't do it as your only option for the reasons listed in the OP. You won't be able to afford what you really need to protect your family, and you are probably going to be paying so much if you hit a point you have to cut back, that is likely one of the things to cut.

[disneysteve]

In fact, the life insurance I personally own will work with you and adjust it down if needed. You can't go up without another physical, but you can go down if you want.

I did a policy review with my broker one time and after looking at everything, he actually told me I was over-insured and we dropped my coverage by about $250,000 (which also lowered my premium). Pretty nice when the person getting the commission does that for you. It's nice to know there are honest insurance people out there.

[GoodSteward]

I did a policy review with my broker one time and after looking at everything, he actually told me I was over-insured and we dropped my coverage by about $250,000 (which also lowered my premium). Pretty nice when the person getting the commission does that for you. It's nice to know there are honest insurance people out there.

Well, not to take away from the fact that the agent does sound like a great guy, if this is a term policy you only get paid up front as an Agent. After a year, the agent is immune to any changes. Whole life, on the other hand, the agent gets paid annually as long as it is active.

Let that sink in when you consider which is best for YOU, and why term isn't pushed so much by most agents. How can companies afford to pay their agents more, and on an annual basis, if they are not making more money off of you to start with? Whole life means more money to the agent and company, but less protection for you. You can see who wins.

[Like2Plan]

So I'm curious to know what the common sense is in that situation?

I am so sorry for your neighbor. Hopefully, she is able to get some help with SS survivor benefits if she still has small children.

I am glad that we haven't been faced with that decision. But, short of losing a house over our head and food to eat, I think the life ins would be one of the last things we would drop.

[snafu]

Income tax season is a good time to re-evaluate your insurance policies since your financial data is at the forefront. Is your life insurance adequate to protect your family factoring in specific circumstances [children's age, debt etc]. Does vehicle[s] insurance reflect KBB valuation. What is an ideal balance for deductible savings and your EF? [insurers don't care what is owing]

Does your home insurance reflect the current replacement value of structure[s] and contents? Do you have an up-to-date inventory of contents? Do you have photos to reflect major possessions? It's usually cost effective to use the same insurer for auto and home, check for discount. Are there any gaps?

Do your policies cost more than a insurance broker provides? Why?

[TexasHusker]

Income tax season is a good time to re-evaluate your insurance policies since your financial data is at the forefront. Is your life insurance adequate to protect your family factoring in specific circumstances [children's age, debt etc]. Does vehicle[s] insurance reflect KBB valuation. What is an ideal balance for deductible savings and your EF? [insurers don't care what is owing]

Does your home insurance reflect the current replacement value of structure[s] and contents? Do you have an up-to-date inventory of contents? Do you have photos to reflect major possessions? It's usually cost effective to use the same insurer for auto and home, check for discount. Are there any gaps?

Do your policies cost more than a insurance broker provides? Why?

Ya'll don't have this in Canada, but in America we have what is called the Discount Double Check.

[Petunia 100]

Interested to know what forum members thoughts on paying for life insurance while unemployed?

I was unemployed back in 2008 for a year and I let my life insurance lapsed back then, we just didn't have the money for it. Luckily I'm still here.

My next door neighbor died suddenly in January at age 53 from flu and pneumonia. (perfectly healthy guy, went to gym regularly, etc. totally unexpected) He was unemployed for about 6 months and had let his life insurance lapsed. His wife is furious that he made that decision. (other issues too that I won't go into here)

So I'm curious to know what the common sense is in that situation?

There's your answer, right in your own post. Do you have people relying on your income for financial support? If yes, then yes, you need life insurance whether you are employed or not.