life insurance -- how do you know when no longer necessary

[KellyJef]

I would love some input.

DH is 63 and had a heart attack with quadruple bypasses two years ago. His health currently is considered satisfactory.

We have had $50,000 worth of life insurance from a universal life policy since 1988. Unfortunately, when we bought the policy in 1988, the agent misrepresented the policy. We were told that the $50 premium would remain in effect until the policy matured at age 95.

We found out Friday that I have to start paying $120 a month in premiums now

We have already paid in over $13,000 in premiums and the $1440 annual premiums may be more than it is smart to continue. If we actually continued paying until age 95, the premiums would be over $57,000 although I'm sure that's not really how it would work.

I guess my question is: does there come a time when life insurance is not truly necessary?

If my husband were to die, I am capable of taking care of myself with my social security and pension income. We also have an emergency fund of $50,000.

Mortgage is paid for and we have no debt whatsoever.

We have an appointment next week with the insurance agent to discuss whether or not we want to let the policy lapse. I'm assuming if we do that, there will be a small amount of cash surrender value.

Any advice would be really appreciated.

[kork13]

I'm no expert with insurance matters, but from what you've told us, I would say that you do not need the policy. The only question would be regarding final expenses (hospitalization, burial costs, etc.). If you have enough to cover any (or multiple) of those things, then you shouldn't need to continue paying for the insurance. Rather, start saving those insurance premiums in an account designed to cover those final expenses and you won't have to concern yourself with insurance companies when your husband passes.

Actually, one other question... Is your husband in a similar situation, that if you were to go first, would he still be able to support himself as well? You just want to make sure that you're both taken care of no matter what happens.

[Seeker]

Generally, life insurance is what people buy when starting a family or needing to provide for a loved one in case of the primary breadwinner becoming unable to provide anymore.

So generally, when the house is paid for, the children grown and self-supporting, and the SO is able to survive in the status quo or beyond the status quo, then it's reasonable to lapse the policy.

$50k does not buy much in the state where I reside; not sure where you are.

Do you have retirement savings enough to support both you and he for the rest of your foreseeable lives?

If I were you and he, I'd add up all current expenses for a year. Can you meet those expenses by yourself if you had to? Can you pay house property taxes, bills, repairs, etc. if you had to? How about when you retire?

Generally Kork13 is correct in his last sentence. Of course, nobody ever knows the future, but that is what we try to strive for.

Also, know that your policy pretty much doubled in 12 years. And in another 10 years, more or less, is it not also likely that the policy will double again?

[EEinNJ]

The other purposes of life insurance are to settle expenses and taxes. Funeral, end-of-life care, things not covered by health insurance, and estate taxes. If the value of his estate is such that it can't all pass to you and other inheritors tax free, insurance (which is tax free) can be used to pay an estate tax without having to liquidate assets. You should consult an estate attorney and tax adviser.

[disneysteve]

I agree with the others that it sounds like you no longer need this coverage.

You say you are meeting with the agent. Be aware that you will get a hard sell to keep it. You need to go in there fully equipped to say no and not let the agent talk you into expensive coverage that you no longer need. In fact, I see no reason to even have the meeting. Just call and say you've decided to end the coverage.

[KellyJef]

You say you are meeting with the agent. Be aware that you will get a hard sell to keep it.

Yeah, you were absolutely right: we actually met with him today and he did really try to get us to keep it.

The cash value if we decide to let the policy lapse will be about $5,000 which we would use to pre-pay funeral expenses. DH and I both will be cremated and it appears that the $5,000 will cover all expenses for both of us.

We'll be selling our house in a couple of years and moving into the senior apartment complex where I am currently working and which either one of us would be able to afford if one of us died.

I'm glad to see that all the responses agreed that it probably was ok for us to let the life insurance go.

[snafu]

Good on you for sticking to your plan and denying the agent his monthly commission. Most people don't know that an agent and his manager get a part of your premium each and every month as long as the policy is in effect.

Term insurance is purchased to serve specific needs and when those are no longer valid, feel free to drop the plan.

[PrincessPerky]

We know a funeral home director, she wishes everyone had life insurance, because if they don't she doesn't tend to get paid for a LOOOONG time.

Not really sure of the legal/practical end of why, but I know she prefers folk to have insurance. Course her average client does not have a paid for house and nice beefy EF.

[KellyJef]

We know a funeral home director, she wishes everyone had life insurance, because if they don't she doesn't tend to get paid for a LOOOONG time.

Not really sure of the legal/practical end of why, but I know she prefers folk to have insurance.

I'm not sure why she is glad when someone has life insurance because having life insurance doesn't guarantee that the beneficiary will use the money to pay for the funeral expenses?

Even with pre-paying our funeral expenses, we were told that we could take the money out of the account at any time and use it for anything we wanted to: it did not have to be used for funeral expenses.