Did you maintain your Term Life Insurance after ER?

[FreeAtLast]

I just retired a few months ago and I plan to cancel my term life this month.

 

[growing_older]

When my net worth grew large enough to provide for my dependents, pay their college and give them a good start as adults I dropped the term coverage. As it is, their inheritances will be enough to make them FI at a young age even if they do no additional savings themselves. That seemed more than sufficient. If my estate grows enough to become a tax burden, then I'll consider insuring again, but that's a long way off.

 

[Hamlet]

I was looking at the Social Security Actuarial Life Table here--

Actuarial Life Table

It's pretty interesting. Say that an average male is 40 years old when they buy a 20-year term policy. Their yearly risk of death in the first year is 0.002323, and in the last it is 0.010584. So in the last year of the policy, they are 4 times more likely to die than in the first year of the policy.

If the policy was $100k, it would make sense to keep it if the premium was less than about $1000/year. I think that is fairly likely to be the case for a lot of people in this situation.

For people who buy term life relatively late in life, it may make sense to keep it the last few years, regardless of the insurance need.

I think it says something about me that I think I would feel better about dying early if I knew it was costing an insurance company a lot of money

If there is no need for insurance and keeping the coverage is being viewed as an "investment", then the probability of death in any given year of the remaining term would need to be greater than the annual premium divided by the face amount. I think in most cases the insured would need to be in pretty poor health for it to be a wise investment.

 

[tightasadrum]

I have ten more years on my term policy. Because the house is not paid for I plan to keep the insurance. DW could live fine without it, and DD is launched successfully I hope, but the extra insurance would help a lot if I go early. I'm not planning on that, but that's why you buy insurance.

 

[Mulligan]

I was looking at the Social Security Actuarial Life Table here--

Actuarial Life Table

It's pretty interesting. Say that an average male is 40 years old when they buy a 20-year term policy. Their yearly risk of death in the first year is 0.002323, and in the last it is 0.010584. So in the last year of the policy, they are 4 times more likely to die than in the first year of the policy.

If the policy was $100k, it would make sense to keep it if the premium was less than about $1000/year. I think that is fairly likely to be the case for a lot of people in this situation.

For people who buy term life relatively late in life, it may make sense to keep it the last few years, regardless of the insurance need.

I think it says something about me that I think I would feel better about dying early if I knew it was costing an insurance company a lot of money

That actuarial table is very sobering isnt it? Getting to 80 is a 50/50 shot for the newborn, but escaping the 80's alive is very problematic. Less than 1% make it to 100, and I wonder how many of them even know what age they are. Although, that reminds me a lady in the local paper had a headline for celebrating her 106th birthday. They asked her what her birthday wish was and she said "not to be around for the 107th birthday".

 

[Aiming_4_55]

Quote ... I was looking at the Social Security Actuarial Life Table here--

Actuarial Life Table .... Quote


Hmmmmmm I'm 42 and the table gives me only 36 more years. Should I use that with FireCalc and ORP, etc calculators??

I could pull the plug sooner. FireCALC saids I have 100% success today

 

[Bimmerbill]

I got a 20 year term life policy in effect. I think it expires when my daughter is around 20.

 

[FinanceDude]

Only 3% of term life contracts are ever paid out on. YMMV..........

 

[REWahoo]

Only 3% of term life contracts are ever paid out on. YMMV..........

Come to mention it, I've never had one pay out on me. Yes, I realize that's purely anecdotal, but still...

 

[RetireBy90]

As noted by mustang52 and rescueme, there are some situations that could come about where your survivor(s) may need some imediate cash. I have been building a cash account of laddered CDs that can be cashed with minimal penalty to provide for this. However, I plan to keep one policy when I RE so that if I need it at some point I would have it. I understand it can be difficult to get insurance when you get older. I still work, and have a small $200K policy that costs $83/month along with company provided policy. DW should be in good shape with our estate and her retirements so this would just be to provide an extra buffer. I don't think we need the $200K policy, but keeping it through the term (something like 68) as an extra buffer. My mom (who has retired 15 yrs) is FI but still worried about her being able to care for herself if she has another 20 years. She needed worry, she is doing great financialy, but she does. I expect if it is a concern for her, it may be for me/us as I approach her age. Sorry for the ramble. If your FI you don't need it but you may want it.

 

[ziggy29]

Some level term policies offer a feature which lets you keep the premium levels fixed but with a decreasing amount of coverage over time once the contract expires. If you find yourself still needing *some* insurance but your needs are decreasing over time, this could be an option in some cases. That's especially true if you were originally underwritten in a "desirable risk" category and you are less insurable today.

 

[Aiming_4_55]

Only 3% of term life contracts are ever paid out on. YMMV..........

Life.... YMMV

It would be interesting to know of those paid out, if they kept the policy to end of their term.... say age 65 or so. I can see a majority of the policies are not paid out as people forget to pay the annual premium or want to reduce expenses, allowing the policy to elapse.

My current thinking, regardless of FI, semi-ER, or ER, I would keep the policy until my mid-50s for various personal reasons. I believe after age 45 for me, the policy I have is cheaper to maintain than to purchase via megacorp. I just would feel better knowing that my family would have a few extra bucks to add to their safety, but that's just me. This is probably a result of history...my dad passing at a young age (48) and uncle (65). In both cases no insurance when the families could of greatly benefited. I might reconsider if the market has a bull run vs being flat.