life insurance thoughts

[LivingAlmostLarge]

I just paid for the 10th time my annual life insurance premium. We have Voya insurance used to be ING. Got it in 12/2009, hence the annual renewal right before we had our first child. I have $500k for $243/year and DH has $2M for $1098/year. That means we've paid $2430 and $10,980 for peace of mind for 10 years. I have another 15 years left which puts us right about the time my youngest should be done with college. I'm really glad we bought them because we moved and switched jobs and DH was unemployed for a year so if we had bought life insurance through his company we'd have been SOL for a year. That being said we do buy more cheaply from work but rest knowing we have something just in case he's ever laid off or anything.

But I wonder if we should see this through another 15 years or when we should cancel it? When do most people do it? How do they decide?

[disneysteve]

Term life is critically important and dirt cheap. Anyone who needs it should buy it on their own. Having additional coverage through work is fine but that should be above and beyond the coverage you buy since if you leave the job, you lose that coverage.

You can cancel life insurance when you no longer have a need for it. As long as there is anybody financially dependent on your income, you should have coverage. I'm 55 and support my wife and largely support our daughter so I have coverage. I've reduced my coverage a couple of times over the years as our projected need lessened but if I died tomorrow, I'd want my wife and daughter to have enough to take care of everything without any worries.

[Like2Plan]

But I wonder if we should see this through another 15 years or when we should cancel it? When do most people do it? How do they decide?

We struggled with this decision for a few years. I could not really think of any reason to keep the LI on DH, but he had some earlier health issues (now resolved) that would have made it pretty expensive if we wanted to get another policy. I did identify a gap if I were to predecease DH prior to him claiming SS, so keeping my LI was a "no-brainer".

Eventually, we decided to phase DH's individual policy out. So, we cut it in half one year and cancelled it completely the second year. He currently has LI through his employer, but when he quits working he will not have any LI.

[Drake3287]

Like many, I did the same exact thing after having kids years ago. My insurance amount was basically enough to pay off the house if anything happened to me. Because my wife worked I figured she'd be fine financially plus we even had a small savings at the time. Fast forward 20 years or so and I recently finally canceled my MET Life policy simply because we have enough assets/pension/savings to live comfortably plus our house is paid off. I should have canceled it much earlier, to me I was afraid that the second I canceled it I would drop dead, sort of like having a car breakdown a day after the extended warranty expires.

Canceling it or not totally comes down to dollars and cents, and what it would take for your surviving spouse/family to live the same life style that your use too. Thinking about how much you've already spent is no different than looking at how much you've paid in car insurance all these years. Same basic concept, simply insurance for peace of mind.

[disneysteve]

Canceling it or not totally comes down to dollars and cents, and what it would take for your surviving spouse/family to live the same life style that your use too.

Exactly. You need to run the numbers.

[corn18]

And don’t forget to account for reduced benefits from pensions and SS for the survivor if that applies to your situation. I have term life on me out to age 78 to cover just that.

[LivingAlmostLarge]

Not essential but nice to have. We definitely needed it 10 years ago and for the next 5 years I can see it be really necessary. After that probably not at all. But I am very hesitant about cancelling. Yes we also have it through the job.

[Captain Save]

I just paid for the 10th time my annual life insurance premium. We have Voya insurance used to be ING. Got it in 12/2009, hence the annual renewal right before we had our first child. I have $500k for $243/year and DH has $2M for $1098/year. That means we've paid $2430 and $10,980 for peace of mind for 10 years. I have another 15 years left which puts us right about the time my youngest should be done with college. I'm really glad we bought them because we moved and switched jobs and DH was unemployed for a year so if we had bought life insurance through his company we'd have been SOL for a year. That being said we do buy more cheaply from work but rest knowing we have something just in case he's ever laid off or anything.

But I wonder if we should see this through another 15 years or when we should cancel it? When do most people do it? How do they decide?

This is personal to you... what you're really buying is the peace of mind.. if you cancel it .. will you have a peace of mind that your family will be good to go.

ANother reason I don't subscribe to any mainstream advice or cult advice... the amount of DB you buy doesn't have to be 10x your income .. it can be more or less.. for example .. if you don't want to pay the premium you're paying.. have a better plan for when you die. How is your family going to utilize that money. I don't have a lot of DB due to my health issues... The plan I want to instill is for my wife to use some of that money to invest in advertising for her business so she can work less and get paid more ... 10-20k would be good enough to get that accomplish.

this is just one example of planning .. htink about what else your family can invest in .. or what expenses you can cut. ..

with that being said if I were you .. your premium is so cheap ..I wouldn't care.. that's my personal opinion ..it's coming from someone who can't get premiums that cheap.

[disneysteve]

the amount of DB you buy doesn't have to be 10x your income .. it can be more or less.

Absolutely, the 8-10x income is a starting point. You need to sit down and decide what you want the insurance policy to cover in the event of your death. I've decreased my coverage a couple of times over the years as our situation changed. Now that our daughter is older and finished college and our mortgage is paid off, I'm probably over-insured again. Of course, I'm also older so I'm not sure if cutting coverage at this point would save us much. I really ought to look into that.

[kork13]

Absolutely, the 8-10x income is a starting point. You need to sit down and decide what you want the insurance policy to cover in the event of your death. I've decreased my coverage a couple of times over the years as our situation changed. Now that our daughter is older and finished college and our mortgage is paid off, I'm probably over-insured again. Of course, I'm also older so I'm not sure if cutting coverage at this point would save us much. I really ought to look into that.

Why not just cancel it entirely? I presume that if you were to die, your wife could pretty easily live off of what you have saved...? That would save something around 100% of the premiums

[LivingAlmostLarge]

Why not just cancel it entirely? I presume that if you were to die, your wife could pretty easily live off of what you have saved...? That would save something around 100% of the premiums

I don't know either. Maybe it's a security blanket. I am thinking I might be letting the 25 years run out.

[rennigade]

We recently signed up for life insurance. Neither of us really needed it but it was so cheap for $500k coverage. IMO...anyone who would truly rely's on someones life insurance did a major disservice to themselves throughout the years. At the end of the day, you should never rely on someone 100%. This is a major quality I like about my wife. She was raised to be strong and independent. Thats a hard thing to find.

[disneysteve]

IMO...anyone who would truly rely's on someones life insurance did a major disservice to themselves throughout the years.

So my wife did a "major disservice" to herself by being a SAHM to our daughter all those years? I'll be sure to tell her that. She should have been out building a high-paying career instead so she could pay all of the bills if I dropped dead.

My wife could support herself if I died, but she certainly couldn't maintain our current lifestyle. When she was working, she only earned 1/4 of what I earned, maybe less. Insurance on me was critical so that she and our daughter wouldn't have been out on the street if something happened to me.

[disneysteve]

Why not just cancel it entirely? I presume that if you were to die, your wife could pretty easily live off of what you have saved...? That would save something around 100% of the premiums

I don't know. I guess her expenses would be lower if I wasn't around - one less mouth to feed, one less car, etc. I honestly don't know all the details of what she would have available to her if I died. She still couldn't touch her retirement accounts until she is old enough. What happens with my retirement accounts? Would she get access to that money? Would she get any type of SS benefit or not until she's of age?

[corn18]

I laid out income and expenses by year in my spreadsheet in the event that I died. It was enlightening. Although we plan to have plenty for retirement, I had not considered the loss of income from my pension having 55% survivor benefits and the reduced SS. So I modeled all of that and I am glad I have term life policies laddered out to age 78. The most revealing aspect of life insurance is that its real value deteriorates over time. A $500k policy today is a LOT less is real terms after 30 years.

DS, I would recommend running your numbers as if you are dead. Adjust expenses, but don't assume it is 50%. It is not. Adjust income accounting for higher taxes for single vs. MFJ. RMDs can be a real killer WRT taxes if you have a large 401k/IRA balance and you die.