Do I still need life insurance?

[Alvin Tostig]

This Early Retirement website has just been a wealth of information, so I need the expertise again for people on this board.

I am planning to retire from my fulltime job between 6 months and 24 months from now. I'm almost 60, wife is 56. (I'll continue to work part-time - University professor, wife will continue to work as a realtor).

Currently I have $200,000 life insurance at no cost to me through my company (this represents one times my annual salary). The question I have is regarding the additional $500,000 annual renewable term life policy I have had for 25 plus years. The premium is now about $2500 a year and is due shortly. (My wife also has a $250,000 policy - same type).

My net worth is currently $2.2 million including my house (worth $430k). No mortgage, kids are grown up out of the house and self sufficient, No debts except for a HELOC of only $4000 which I'll be paying off in the next few months.

So, I'm thinking, why do I need this policy? Yet I'm hesitant to drop it. Here is why - Let's say I work the max - 24 months - that's two years salary at $400,000. If I were to die tomorrow, that's $400,000 we planned and now we would not have. (But my wife would still get the $200,000 from the company plan). If I'm let go I don't have the coverage also.

But all other indicators to me are to drop the plan and save the premium money. Or call my insurance company and ask to reduce my coverage from $500,000 to $250,000. I know I'm all over the place, but I'm wondering why I'm hesitant to drop the coverage now while I'm still working. It really seems to that I do not need it.

 

[ChiliPepr]

Without knowing your expenses and future needs it is tough to say. But, basically, if you died tomorrow could your wife live a comfortable rest of her life without the insurance money? If she can, you do not need it, if it would be a hardship for her, you need the insurance.

 

[user5027]

Sounds like you do not need it. Have you figured expenses and income for the survivor if either you or your wife died? Also when I talked to our agent before dropping our term policies he asked how our health was. I even went for a physical and had the full series of blood tests before dropping mine. Think of it in reverse. The insurance company wants to know your health before writing a policy. You want to know before dropping.

 

[MichaelB]

A few recent threads you might find interesting
http://www.early-retirement.org/forums/f28/fire-and-life-insurance-81000.html
http://www.early-retirement.org/forums/f28/drop-term-life-insurance-when-nearing-fire-80232.html
http://www.early-retirement.org/forums/f28/renew-term-life-insurance-78622.html

 

[38Chevy454]

Depends on your budget, as previous replies mentioned. Life insurance is probably not needed, it seems you have sufficient assets to support your wife if you were gone. However, not knowing your budget and expenses, that is based on reasonable guess.

 

[youbet]

Let's say I work the max - 24 months - that's two years salary at $400,000. If I were to die tomorrow, that's $400,000 we planned and now we would not have. (But my wife would still get the $200,000 from the company plan). If I'm let go I don't have the coverage also.

.

Per your own analysis, apparently you still need it, or at least enough of it so that if you die your wife still has the money you planned on.

But I'd go back and rethink those plans in more detail. If you were to die tomorrow, how would DW do financially? Would her expenses decline enough so that the income you don't earn ('cause you're dead) isn't a problem? Etc.

The premiums you're paying are a small percentage of your income, so this isn't as impactful a decision as it would be for others with the same premium but much lower income. Still, work the numbers and determine if DW really would need the insurance payment or if it would just be yet another level of security.

 

[Htown Harry]

I'm almost 60...

You mentioned annual renewable, but not whether there was a level premium on your policy.

If the premiums go up annually or in steps every few years, take a look at the premium tables. The premiums on my life coverage with age-based premiums in 5-year brackets will go up by about 35% on my 60th birthday.

Some other types of policies keep the premiums level but reduce the benefits as you age.

My point is that a decision based on the cost / benefit can get easier as you age. If you are uncomfortable dropping coverage at this time, you can revisit it every year at premium time.