Should I Convert My Term Life Policy

[oscar1]

My wife and I are 51 and 53 respectively and have had cheap $250k term life poilicies for 20 years as protection from any misfortunes that might have occured and to insure that our daughter would be able to finish college. So, no misfortunes occured and the daughter will graduate college next year. My insurance agent is hounding me to convert one or both of these policies to whole life policies as further leverage before we get into our 60's. But the monthly premiums will jump dramatically at a time when I am trying to reduce monthly expense committments in order to retire early (targeting about $36k annual expenses and ensure my safe withdrawal rate never dips above 3%). Increasing monthly expenses by $250-$500 seems like I am going in the wrong direction. The term life policies served there mission. Am I missing something here??

[lhamo]

Only that your insurance agent is desperate to get your commission.

Terminate the policies and invest the $250-500 in something that the agent doesn't get a cut of.

[MichaelB]

Quote:

Originally Posted by oscar1 The term life policies served there mission. Am I missing something here??

Excellent news that the policies were never needed! It doesn't look like you're missing anything. As you approach financial independence you probably need little or no life insurance.

[racy]

Hi oscar,
Life insurance should be called 'income protection insurance', or at least thought of that way. You had term life to provide emergency income for your daughter's education, which is no longer needed. Assuming you have no other need for income protection, then you have no need for 'life' insurance, in any form. However, if you do need income protection, then term insurance is preferable to whole life. The general advice is to keep investment products separate from insurance. (Whole life is typically sold as a way to accomplish both, but costs are higher than keeping things separate).

[panacea]

If you have enough money to retire, you have enough money to die. No more life insurance is needed if you are financially secure. Keep the premium money in your pocket and out of your agent's.

[BigE]

Have recently dealt with a similar situation. Have avoided most insurance products except a small disability policy and term life insurance. The term policy was for ages 40-50 and ends this April. Had to have sit down talk with wife and explain that we no longer need the expense of term life because she would be FI if I croaked. Took a while for her to feel comfortable with this decision. So after April, no more term life and I'll save that money (new premiums are jacked up pretty high) and take my chances.

[rockyj]

One thing you might want to consider is whether the life insurance could serve as a hedge against long term care, and at what cost, if you have not made other arrangements for that. I realize they do not cover the same things; I do not know your comparative costs and I am not recommending that doing so would be right for your situation. But I'd think it's worth at least a thought and quick look at your numbers. We are on the cusp of being able to self-insure for LTC but I have kept a long-held whole life policy (sold to me in my younger days) for that reason, and I am highly mistrustful of current state and future costs for LTC products. Keeping the whole life policy gives me a predictable coverage amount (to help replenish the kitty for spouse for long term or home care costs I may encounter in the end game) at a predictable and (in my case) very affordable and decreasing cost. Your conversion policies may or may not do that. Again, no recommendation one way or the other, you'd have to look at your own numbers and evaluate your comparative risks.

[SteveL]

Do you have debts such as home loan or credit card or auto loans that would be difficult for a survivor spouse to pay? If not, with children through college and gone, your need for life insurance has passed.

[brewer12345]

Dw and i just canceled our policies.

[psweath]

I keep life insurance because if I die, my wife only receives 50% of my pension, and my full SS amount just stops because her SS benefit is (just slightly) larger than mine. That's a hefty reduction of income and I think she will need the life insurance to make up for it.

[NanoSour]

Quote:

Originally Posted by psweath I keep life insurance because if I die, my wife only receives 50% of my pension, and my full SS amount just stops because her SS benefit is (just slightly) larger than mine. That's a hefty reduction of income and I think she will need the life insurance to make up for it.

Same here. I use ESPlanner to estimate our insurance needs so that my DW will be able to keep the same living standard should I pass. You might want to check it out. For my ER situation, it recommends 100-200K depending on the year.

Home | ESPlannerBasic

[Sue J]

Quote:

Originally Posted by oscar1 The term life policies served there mission. Am I missing something here??

No, I don't think you are missing anything except a big new expense.

We bought 20 year term insurance at age 45. DH retired at age 55. No mortgage, no debt, kids are grown and on their own.

While DH's COLAed pension covers our monthly expenses and we are able to save, we don't have large wealth. If he died first I get 100% of the pension, for life. If I die first he gets a step up to the single life pension rate.

It looks like we don't NEED the life insurance any more. But it's so inexpensive that we keep it as an extra safety net. If we were to cancel it and later need new policies the cost would be outrageous. We will drop these when the term is over at age 65.

Mine - $100,000 for 14.53/mo = $174/yr
DH - $250,000 for $53.33/mo = $640/yr

This $68/mo is the first expense we would drop if we needed to cut expenses.

The only reason to convert term policies to whole life is if you need the protection and you are uninsurable for new policies.

[rkser]

There is no need. As is mentioned above by other poster, it is a income protection Ins and you do not NEED it.

We are in a similar situation, I am 57 and DW is 52, baby of the house is finishing college and I am ignoring the conversion papers to universal life policy my agent keeps sending me.

The agent should stop and think, if an individual was wise enough to not buy a full life or universal life and opted for term life 20yrs(in my case) back, he does not turn stupid to buy a full life now.

No need to buy any unnecessary Insurance.

[psweath]

Quote:

Originally Posted by NanoSour Same here. I use ESPlanner to estimate our insurance needs so that my DW will be able to keep the same living standard should I pass. You might want to check it out. For my ER situation, it recommends 100-200K depending on the year. Home | ESPlannerBasic

Nano, thanks! I will checkout ESPlanner!

Pete

[ziggy29]

Quote:

Originally Posted by oscar1 The term life policies served there mission. Am I missing something here??

No, you are not. Insurance is insurance and investing is investing. When people try to sell you insurance as an investment or investments as insurance, run. Both have their place in most financial plans but one should not, with few exceptions (if any), be used to accomplish the other.

True insurance is something you buy that you hope you will never need.

[oscar1]

Thanks for everyone's prompt reply. If this was 'Who Want's To Be A Millionaire' I feel like this 'poll the audience' sure does work!

[Al in Ohio]

Quote:

Originally Posted by panacea If you have enough money to retire, you have enough money to die. No more life insurance is needed if you are financially secure. Keep the premium money in your pocket and out of your agent's.

Absolutely. With no future income to replace and daughter ready to fully fly the nest, your need for any kind of life insurance is now over. This agent is not to be trusted considering what he's trying to sell you at this point in your lives. I'd disassociate yourselves from this guy for good ASAP as soon as you cancel your term life policies.