Role of life insurance

[Martha]

Quote:

Originally Posted by moretolife I was planning to post a life insurance question tonight and saw this discussion. After reading this thread, I think I can guess what you will say, but here goes anyway... My husband and I are both 55. Our children are all financially independent. We have each carried $200k term life for a long time. My husband retired 18 months ago. He has some serious health problems and is nervous about dropping the insurance. I plan to continue my life insurance until I retire to protect him if I should drop dead in the near future. At our ages, I expect our premiums to increase dramatically. Currently we are each paying a little over $700 a year for our policies. Is this a waste of money?

If you need it to maintain the financial independance of the surviving spouse, I would keep it. So far the cost isn't so bad.

[Martha]

This discussion reminded me of a post a while back. This is why life insurance if you still have children at home can be invaluable:

Quote:

Originally Posted by anonimitycity I am in a similar situation. I lost my wife suddenly and between survivor benefits and life insurance I have been able to stay at home (just over a year so far) and care for our 2 children. I'm 43. My wife and I had a wonderful marriage of 15yrs (plus a 5 year courtship) and were still very much in love. I'm not sure we were loving our respective careers and we both were saving madly to ER at 55. I know there aren't any guarantees attached to tomorrow, but still it's a bitter pill to swallow watching so many long planned for dreams go away in an instant (as I'm sure we're all reminded of by Katrina). Even given my own profound grief (an exhausting state), 2 grieving preteens (and all their associated needs), a house to keep together and several pets, people still ask..."so, when are you going back to work?", or..."what DO you do all day?" Yesterday someone asked me if I was retiring early, I answered that I wasn't sure that raising two kids alone while keeping a house together was my idea of "retirement". Its a full time commitment (that is much more important than my old job). In most cases I just say that I and my kids are fortunate that I am able to stay at home for "awhile" and time will tell with the work thing. I think that says all they need to know of our financial situation. If staying home allows you to get done what needs to be done and most importantly gives you quality time with your loved ones, you should do it and be commended. I know I would be a completely different animal (as would my kids) if I had to pick them up at the end of a long workday, tired and grumpy, to take them out to another carry-out meal followed by grocery shopping, laundry, errand running, lawn mowing, snow blowing, bill paying...etc...etc. I have a whole new appreciation of single, working parents and all they do.

My parents did not have life insurance. They often spoke of what to do if my father died as he had a number of health problems. Instead, my mother with no apparent health problems died suddenly in her 30s. Our family struggled for years to keep things together. Life insurance at least would have removed some of the financial pressures.

[uncledrz]

My wife and I each carried life insurance until we had enough assets so that if one of us had died before the kids were grown there would be sufficient funds to feed, clothe, shelter, educate, etc the kids. Once we got there, we dropped the insurance although it never was too costly (term is pretty inexpensive).

Sure, my wife is beautiful, but I never wanted to count on anyone else (including the government) to take care of the kids.

Sure my wife had her own career, but a single parent has a great deal more responsibility than each parent in a dual parent household.

Always felt that we brought the kids into this world, and had a responsibility to take care of them.

Uncledrz

[sgeeeee]

DW and I both worked as electrical engineers. *We both held jobs that paid more than we needed to live. *We had no kids and no parents requiring care. *

We never had life insurance. *We couldn't figure out what we would be insuring against. *

[azanon]

Quote:

Az, I would much rather my survivors have options if I keel over early.* My wife has two Master's degrees from Columbia; I have no doubt she could manage to keep meat on the table in my absence.* But that would mean my kids would be put in day care and my wife would have to make some awfully hard choices.* For the couple hundred bucks a year in premiums I'd save, its not worth it.

Again, for clarity,* i wasnt advocating the extreme opposite of your extreme (which would be literally replacing yourself forever, monetarily).* *I have a plan that would give them plenty of money and resources, measured in a few years, to adjust to the new situation of me not being there.* *I, along with Haha, agree that the unfortunate burden of my demise should be shared by everyone, including myself.* *Its not like I intentially broke "the contract" you referenced.

If life were supposed to be easy, perfect and predictable, i'd go with that and provide an insane life insurance policy.* But its not, so why should I struggle to make life something its not.* *I'm sure everyone in my family, including myself, will be dealt plenty of curveballs over the course of a lifetime.* If you ask me, that's what life is all about.

As an aside, I am an extremely careful and healthy person.* My early demise is unlikely, to make the most extreme of understatements.

[brewer12345]

Az, don't take this the wrong way, but sometimes I feel sorry for your wife and kid.

[saluki9]

Quote:

Originally Posted by azanon Generally speaking, i do not agree with this. Why should anyone feel obligated to completely replace themselves, as if the people left behind have no ability to adjust to the new situation. Take me for instance. I have a wife and one kid. My wife is a knockout. I know plenty of men that would "adopt" a free kid (a damn cute one too), and take care of her, for the opportunity to sleep with her every night. I have no question in my mind my wife could replace me with a new husband. I have little doubt she could find one too with a decent job.

Wow, that may be the coldest thing I have ever read here, and that is saying a lot.

For the sake of my hectic job, my wife does not work. I would not want her to have to start over and find some guy to support her right away if I kick over. As soon as I married her I consider her my responsibility for the rest of her and our childrens lives reguardless of whether I'm alive or not. I have a $2m term policy which costs me all of about $90 a month through the CPA life insurance program. I wind up getting most of it back at the end of the year because the plan refunds the excess. I also keep a perm variable policy which I expect to use to pay estate taxes eventually.

I've heard the excuse from people "well I don't want her on the beach drinking pina coladas on the insurance money if I die" I guess I was never able to follow that thought.

[grumpy]

Quote:

Originally Posted by azanon As an aside, I am an extremely careful and healthy person.

azanon,

So was I. I carried only the basic term life insurance offered by my employer (approx. 1 year's salary). Then at age 36 I found myself with a wife, two small children and a diagnosis of testicular cancer. I couldn't buy more insurance then at any price I could afford. Fortunately, a few years later the insurance "open season" allowed me to enroll in 5 X salary coverage with no medical exam. I carried that until the kids were out of college, cut it back then to $250K and dropped that when I retired.

The point is, you can only get reasonably priced life insurance coverage when you don't need it (i.e. when you are healthy). When you are sick and need it, you can't get it. Something to think about.

Grumpy

[vinhmen]

Quote:

Originally Posted by azanon My wife is a knockout.* I know plenty of men that would "adopt" a free kid (a damn cute one too), and take care of her, for the opportunity to sleep with her every night.* *

Why not post a pic and let us decide for ourselves*

www.hotornot.com

[Nords]

Quote:

Originally Posted by HaHa Untimely death is a misfortune, certainly for the one who dies. Shouldn't at least some of that misfortune be shared by his survivors? Since almost all woman today are trained to work at something, it seems to me that one needs only enough life insurance to to get the kids to school age, and if the widow isn't current in her skills, to give her time to become current. A lot less than life for a 28 year old mother! Also, it's not like widows lose all attractiveness in the big marketplace of love. Reverse he/she, his/her, man/woman, widower,/widow in the not infrequent case where the woman is the main or only breadwinner.

Sure, Mikey, if I'm gonna die I don't want to suffer alone! I don't want to inflict that suffering on total strangers, either, I want to share it with family & friends!!

I'm not sure which implication is more repugnant:
- that we're foolishly funding beneficiaries who are all more than capable of pulling their lives together by their own damn bootstraps and don't need our largesse, or
- that we (both genders) need to trade sex for survival.

No one has suggested that we should sacrifice our own well-being to support our families in a life of luxury. Life insurance is a substitute for what we implied would be provided by our continued presence. The size of that substitution is up to the individual... and clearly some feel more of a commitment than others.

We're in the same situation as SG-- we both had our own earnings and we've set aside enough to raise our kid. So we don't carry life insurance.

[SteveR]

AZ, I can only hope you are kidding about your wife easily finding a new husband.

My personal experience with not only being widowed myself, but also discussing a wide variety of dating and financial issues with many many widowed persons over the past few years says you are clueless in this matter.

The shared experiences indicate that most widows do not remarry and if they do, it won't happen for several years. If there are small children in the picture, then add some more years to that. You are making a really big assumption that your wife would even want to remarry. By the time your kid(s) are grown and gone she may find she likes being on her own and will ER by herself. It happens all the time. That would mean she would need to support a family, support herself, work full time, take care of a house, lawn, repairs, cook, clean, auto maintenance, pay bills, shop and so a hundred other things as a single parent and sole breadwinner. Try to find time to breath much less date with all that going on.

Maybe you she will find a nice wealthy guy and will live in the lap of luxury for the rest of her life. Don't count on it. She would have a very tough life ahead of her and one filled with stress and emotional trauma. If she also has financial issues to deal with because she cannot work or cannot make enough money to support a family then your role as a husband and supporter of a family was truly inadequate. Life insurance is a way of allowing those left behind to have what you intended they have in life had you lived. It is not intended to be a a ticket to Easy Street but is intended to help the family keep the intended standard of living for as long as the need exists.

What happens if your wife gets in a car accident and is disabled or one of the kids gets a disability? The added expenses can wipe out a lot of net worth in a hurry.

This stuff happens to real people and I can cite more examples than I care to of destitute widows scratching to survive after the loss of their spouse. It is an individual choice and one that should be carefully considered.

[JPatrick]

Quote:

Originally Posted by SteveR AZ, I can only hope you are kidding about your wife easily finding a new husband.* My personal experience with not only being widowed myself, but also discussing a wide variety of dating and financial issues with many many widowed persons over the past few years says you are clueless in this matter. The shared experiences indicate that most widows do not remarry and if they do, it won't happen for several years.* If there are small children in the picture, then add some more years to that.* You are making a really big assumption that your wife would even want to remarry.* By the time your kid(s) are grown and gone she may find she likes being on her own and will ER by herself.* It happens all the time.* That would mean she would need to support a family, support herself, work full time, take care of a house, lawn, repairs, cook, clean, auto maintenance, pay bills, shop and so a hundred other things as a single parent and sole breadwinner.* Try to find time to breath much less date with all that going on. Maybe you she will find a nice wealthy guy and will live in the lap of luxury for the rest of her life.* Don't count on it.* She would have a very tough life ahead of her and one filled with stress and emotional trauma.* If she also has financial issues to deal with because she cannot work or cannot make enough money to support a family then your role as a husband and supporter of a family was truly inadequate.* *Life insurance is a way of allowing those left behind to have what you intended they have in life had you lived.* It is not intended to be a a ticket to Easy Street but is intended to help the family keep the intended standard of living for as long as the need exists.* What happens if your wife gets in a car accident and is disabled or one of the kids gets a disability?* The added expenses can wipe out a lot of net worth in a hurry.* This stuff happens to real people and I can cite more examples than I care to of destitute widows scratching to survive after the loss of their spouse.* It is an individual choice and one that should be carefully considered.*

Very good post Steve, although I'm sorry you experienced it first hand.

[haha]

Looks like this board is foursquare in favor of life insurance, and lots of it! Anyway, it is nice seeing one of my posts quoted for a change. Even if everyone but Azanon thinks I am wrong.

For the record, I never said no life insurance, just that it seemed excessive to me to feel that one had to literally make oneself worth more dead than alive.

Never did think that was a good idea. But I think it is totally cool for you guys to do it! Just watch your backs.

Ha

[brewer12345]

Here's the thing, Ha: I like to think that I mean more to my wife and kids than a paycheck. Would you off your spouse for any sum of money? I wouldn't.

[haha]

Quote:

Originally Posted by moretolife I was planning to post a life insurance question tonight and saw this discussion. After reading this thread, I think I can guess what you will say, but here goes anyway... My husband and I are both 55. Our children are all financially independent. We have each carried $200k term life for a long time. My husband retired 18 months ago. He has some serious health problems and is nervous about dropping the insurance. I plan to continue my life insurance until I retire to protect him if I should drop dead in the near future. At our ages, I expect our premiums to increase dramatically. Currently we are each paying a little over $700 a year for our policies. Is this a waste of money?

If by paying $700 per year, you avoid feeling nervous, it is way cheaper than therapy, and works better too.

Keep the policies until you are sure you don't want them any longer. As Grumpy said, if you are sick you can't elect to buy life insurance, but you can elect to keep it. In fact, if he is quite sick, paying the premiums could be a very good investment for the survivor. Kind of an unpleasant thought but true anyway.

Ha

[haha]

Quote:

Originally Posted by brewer12345 Here's the thing, Ha: I like to think that I mean more to my wife and kids than a paycheck.* Would you off your spouse for any sum of money?* I wouldn't.

Me neither Brewer. But then you and I are superior individuals.

Ha

[New Thinking]

I look at life insurance a little bit differently than many on this board...Life insurance does provide a tax efficient source of income when it is needed.
As many have posted, I can replace my lost income for my wife and kids with insurance while I am working.

Permanent life insurance can be left to my kids when my wife and I are gone. We can leave each child say, $500,000 tax-free when we are dead..If I leave them an IRA, they pay mucho taxes..With life insurance set up, I CAN SPEND EVERYTHING COMING IN ON RETIREMENT AND ENJOYING LIFE DURING RETIREMENT. We want to leave the kids something and this is our choice.

Another other way to use life insurance is to provide it on my life so that when I die during retirement (and chances are I will as I am a man and 4 years older than my wife), I leave a tax-free source of income to my spouse..She takes essentially tax-free income from the life insurance proceeds and she "inherits my higher Social Security benefit, which also comes to her tax-free...Now that I know I have her set up when I die..We can move to a higher spending rate (safe withdrawal rate) or single life immediate annuity because I don't need the money to last as long. Again, the idea is to risk manage to adopt a higher standard of living during retirement and have peace of mind.

[JPatrick]

Quote:

Originally Posted by New Thinking I look at life insurance a little bit differently than many on this board...Life insurance does provide a tax efficient source of income when it is needed. As many have posted, I can replace my lost income for my wife and kids with insurance while I am working. Permanent life insurance can be left to my kids when my wife and I are gone. We can leave each child say, $500,000 tax-free when we are dead..If I leave them an IRA, they pay mucho taxes..With life insurance set up, I CAN SPEND EVERYTHING COMING IN ON RETIREMENT AND ENJOYING LIFE DURING RETIREMENT.* We want to leave the kids something and this is our choice. Another other way to use life insurance is to provide it on my life so that when I die during retirement (and chances are I will as I am a man and 4 years older than my wife), I leave a tax-free source of income to my spouse..She takes essentially tax-free income from the life insurance proceeds and she "inherits my higher Social Security benefit, which also comes to her tax-free...Now that I know I have her set up when I die..We can move to a higher spending rate (safe withdrawal rate) or single life immediate annuity because I don't need the money to last as long.* Again, the idea is to risk manage to adopt a higher standard of living during retirement and have peace of mind.

Ok, some fine intentions expressed in you post, but you are throwing around figures that I would suppose would reach or exceed 2 million $$.
That amount of cheap term poses no serious challenge when you are forty something, but what are you facing in premiums when you reach 70 and perhaps way beyond?

[MRGALT2U]

Quote:

Originally Posted by JPatrick Ok, some fine intentions expressed in you post, but you are throwing around figures that I would suppose would reach or exceed 2 million $$. That amount of cheap term poses no serious challenge when you are forty something, but what are you facing in premiums when you reach 70 and perhaps way beyond?

As usual, I have a little different slant. I dropped all life insurance
years ago, except for what my employer provided or what my
creditors demanded. I figured that if I dropped dead, anyone left would be
"okay" without life insurance, if they were careful. Still feel that way today.
I am ERed with a very small pile, but DW could make it if she was
frugal (she is for the most part). Thus, I have saved a lot of premiums over the years. Besides, I don't plan on using up any of my meager base
in retirement,
so if all goes well my heirs will still get that.

JG

[SteveR]

Quote:

Originally Posted by MRGALT2U As usual, I have a little different slant.* I dropped all life insurance years ago, except for what my employer provided or what my creditors demanded.* I figured that if I dropped dead, anyone left would be "okay" without life insurance, if they were careful.* Still feel that way today. I am ERed with a very small pile, but DW could make it if she was frugal (she is for the most part).* Thus, I have saved a lot of premiums over the years.* Besides, I don't plan on using up any of my meager base in retirement, so if all goes well my heirs will still get that. JG JG, What happens if your DW dies first? Without her income would you be OK? Also, you might consider disability insurance on DW while she is still working. If inflation takes off you could get really screwed if she cannot work.