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Life Insurance Decision
Old 06-02-2015, 09:21 AM   #1
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Life Insurance Decision

I am currently 64 years old retired and divorced with three adult children. I have a comfortable pension and monthly expenses are thankfully not an issue for me at this time. The organization from which I retired was carrying $50,000 term life insurance for all its retirees. Last week I was informed that the amount will be reduced to $25,000 and that I can pay $25.00 a month to maintain the $50,000 amount. My initial reaction was to decline the coverage, but now I am having second thoughts -- mostly concerning the money that would go to my kids who are all struggling to make it in this increasingly difficult economy for young people. Any thoughts or suggestions would be greatly appreciated. Thanks in advance.
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Old 06-02-2015, 09:28 AM   #2
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If it were me and my kids needed help (and would put that help to good use), I'd prefer to find a way to do it now rather than make them wait until I died. They need it now and may not need it by the time the insurance proceeds are paid out.
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Old 06-02-2015, 09:50 AM   #3
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If you live another 40 years and pay $25 per month, you will have paid $12,000 in premiums for a benefit of $25,000, which will probably be worth $5000 in today's dollars.

I'm sure you could invest that money for a higher return.
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Old 06-02-2015, 10:26 AM   #4
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If 1; an extra 50K is a significant portion of your estate value, and 2; 25K divided by the number of children would make an significant impact on their lives (probably not) and 3; you can afford the extra 25 bucks a month (less than 5 Starbucks) and 4; you want to leave that for your children, then I'd say go for it. There are worse ways to spend the 25 bucks.


When do you plan on retiring/dying? It only makes sense if you plan on dying before leaving the job. The insurance will not continue as written once you retire.


Term life purchased outside of work is probably better value if you are in fairly good health. You might want to check that out as an alternative.
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Old 06-02-2015, 10:50 AM   #5
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I am already retired and yes the insurance continues until they decide to change it again.
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Old 06-02-2015, 10:53 AM   #6
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I'd shop around for a 20 or 30 year policy with a $25k death benefit, but $25/month sounds like a good deal to me.
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Old 06-02-2015, 10:55 AM   #7
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I'd shop around for a 20 or 30 year policy with a $25k death benefit, but $25/month sounds like a good deal to me.
it's probably a group rate mixed with active employees - if so he's getting subsidized by them, so yes, good deal
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Old 06-02-2015, 11:47 AM   #8
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Big Hitter nailed it -- yes, it is a group rate mixed with active employees in a large county school system.
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Old 06-02-2015, 11:54 AM   #9
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If it were me and my kids needed help (and would put that help to good use), I'd prefer to find a way to do it now rather than make them wait until I died. They need it now and may not need it by the time the insurance proceeds are paid out.
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I am already retired and yes the insurance continues until they decide to change it again.
The risk would be to fund this for 10 years or so and then see the employer rescind the benefit.
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Old 06-02-2015, 12:22 PM   #10
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After FI and retirement, we did not renew any life insurance. Basic $10K from my pension is the sum total.

The numbers did no add up nor did we have a financial reason to continue with it.

We were loaded up with inexpensive company group term when our children were young through to their university years. But that was to cover a specific risk that no longer exists.
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Old 06-02-2015, 12:29 PM   #11
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Thanks for all the replies. Doing a quick check, most policies for $25,000 for a male my age run in the 50 to 60+ dollars a month range.
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Old 06-02-2015, 01:19 PM   #12
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But I think the more key point is that if your kids need money now, then why not help them now, if you can?

If you live 20 years, your kids will be in their 40s, and $25K split among them at that point will likely be fairly meaningless.
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Old 06-02-2015, 02:27 PM   #13
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There are a few other things I'd consider before dropping the limits: (1) Would you like to re-marry? (2) If so, would your new spouse be eligible to receive any pension benefit? (3) How is your health? Are you a smoker? You may not be able to obtain another policy in the future if unhealthy. (3) OTOH, if your healthy and a non-smoker, a preferred rate in California, for example, is $35-$50/month for a $50K 10 year term policy, depending on the carrier. So, $25 per month for an additional $25K coverage isn't such a great deal. (4) What percentage of your net worth does the $25K represent? If you have substantial assets I wouldn't consider the increased coverage amount. But if $25K is a meaningful amount of money to you consider that some term policies have a "living benefit" that provides a percentage of the death benefit that is payable if you're diagnosed with a terminal illness. This can be a handy source of funds for hospice care. The "living benefit" would be clearly indicated in your policy.
(5) If you haven't already done so, verify your designated beneficiary. I've had more than one client whose death benefit was paid to an ex-wife b/c my client neglected to change the beneficiary after re-marriage.
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