Did you maintain your Term Life Insurance after ER?

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Aiming_4_55

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Just been thinking if I'm over protected with my Term Life insurance policies. The expense is not huge, but wondering if many canceled after reaching FI and/or ER.

Personally, I'm on the borderline of FI, another year should do it with hopeful RE around age 48, in 6 years.

I have the following term life insurance policies:

- Company sponsored policy at 2x salary (no cost to me)
- 1st Personal policy 4x salary, 20 year term, expires at age 60 ($500/year cost)
- 2nd Personal policy at 2x salary, 30 year term, expires at age 70 ($400/year cost)

I'm thinking the 2nd Personal policy was a mistake and might drop it. If I drop any policy, it be more costly to get back into a new policy.

Part of me is thinking, even if FIRE, keep the policy enforce by paying the annual cost, so if something happened to me, that's just more $$ for my family.

Any thoughts?
 
I think it comes down to how much money your survivors would need to live on if you passed. Kinda like planning FIRE.
 
If you are FI and can ER you do not need term life insurance? That make you worth more dead than alive.
 
If your survivors would be ok financially in the event of your passing, you do not need the insurance.

The price of the insurance reflects the odds the insurance company thinks they will have to pay a claim on it. I bet you live well past 60, and 70's looking pretty good to! :ROFLMAO:
 
We stopped our term life insurance when our house - only debt - was paid off in full.
We both work and have no kids. A survivor could life on the his/her paycheck alone.
So no loss of income would need to be covered.
 
Life insurance, especially term, is needed when you don't have 'an estate' to provide for your family in the event of death. If you're FI, you don't need to buy an estate (life insurance) anymore. My employer provided a $155K term insurance policy on me and DW has been gainfully employed her entire adult life (so she can provide for herself, in her own view), so I stopped life insurance even before retiring. YMMV
 
I'm close to FI, but I still have a few years to run on a term insurance policy. I bought the 15 year level-premium term policy about 12 years ago. At that time I wasn't sure how my financial situation would turn out and I wanted to assure there'd be enough money for my daughter's college education if I died early (especially if I died before I'd earned a pension). As it is, I could probably let the policy lapse right now, but I figure I already paid a higher premium for those earlier years so I'm probably ahead of the game (actuarially speaking) if I just keep the policy for these last few years. It's cheap insurance and I am still packing away a few acorns with some w*rk, so I guess that means I'm not quite FI.
 
I'm retired, but maintain a (term) policy to primarily provide "instant" cash to DW, assuming I die first, to cover at least 18-24 months of expenses.

While she doesn’t need the money, it will take her a bit of time to "unwind" and re-direct my investment accounts (the main source of income for me, and all household expenses) and convert to more conservative holdings.

Do I/we really need the policy? No - I'm just trying to make things easier in the case of "what if" for her (same reason I'm delaying SS till age 70 - for her benefit).

Of course if she passes first, I'll consider cancelling it, but may keep it to partially pay taxes due upon my death in which the remainder estate passes to an existing trust (for the benefit of our disabled son). While our Roth holdings will pass on without tax, we will have a lot of tax-deferred holdings on which FIT will be due along with possible Federal/State inheritance tax due.

Before anybody mentions Roth conversations, it would not be in our best interest (tax wise) to pre-pay taxes at this time. Also, if our son would pre-decease us, that would eliminate the need to further fund his SNT, along with our remainder estate going to charity upon our passing. Under current tax law, the bulk of our estate can be passed on to our named non-profit charities with little/no tax due, to allow them to continue their "good works". We would rather give it to them in order to make a difference, rather than send our remaining dollars to the government to use in a manner we believe would be just a waste of what we've been fortunate to accumulate over a lifetime.

Just a different way to look at the subject. Again, it shows that "it all depends"...
 
We will not have term insurance once retired. We're both currently insured by megacorps, but once FIREd will have no need for insurance since house will be paid and kid is grown. Also, we have no interest in leaving an 'estate' when we pass.
 
I will drop it as soon as I retire this year. I have coverage through work and pay a little out of pocket for the max coverage.

If something did happen to me, there would be plenty left over for my husband to live out his years comfortably, maybe not his two mooching kids, but plenty for him.
 
One factor to at least consider - the possibility that your death was preceded by a protracted and expensive illness/injury. Even with insurance there might be significant out of pocket expenses. Retaining some term life insurance can help recoup those costs.
 
mystang52 said:
One factor to at least consider - the possibility that your death was preceded by a protracted and expensive illness/injury. Even with insurance there might be significant out of pocket expenses. Retaining some term life insurance can help recoup those costs.
Click to expand...
Another good reason.

Also, while some debts (such as CC balances, on a personal credit card) can be discharged (no payment due) upon death, there are some instances (like a joint held CC) that could be satisified by some "death insurance"...
 
We have insurance on my life as DW will only get 50% of my pensions.
 
It would be interesting to see someone work out whether the last few years of a level-premium life insurance policy are potentially profitable to continue paying as an "investment" beyond needing the insurance coverage.

Obviously, if you have a 20 year term life policy with level premiums, the insurance company makes more money on the earlier years than the later years, since the older you get the more likely you are to die (on average).

Does it typically reach a point in the last few years where you should keep paying the premium as an "investment", even if you no longer need any insurance?

Certainly for people whose health has gotten bad, or for people who are making dangerous lifestyle choices it makes sense to keep paying the premiums.


samclem said:
I'm close to FI, but I still have a few years to run on a term insurance policy. I bought the 15 year level-premium term policy about 12 years ago. At that time I wasn't sure how my financial situation would turn out and I wanted to assure there'd be enough money for my daughter's college education if I died early (especially if I died before I'd earned a pension). As it is, I could probably let the policy lapse right now, but I figure I already paid a higher premium for those earlier years so I'm probably ahead of the game (actuarially speaking) if I just keep the policy for these last few years. It's cheap insurance and I am still packing away a few acorns with some w*rk, so I guess that means I'm not quite FI.
Click to expand...
 
I have never had term life except for what was provided by the company... was not married at the time and who cares what money I have if I died....

Now married, I have enough already.... so, again, no reason to have it...


I also do not see a reason to continue paying if you do not need to replace income going forward... even if it is cheap... it is still a cost no matter how cheap it is....
 
My view is that you need to think of what the proceeds of the life insurance would be used for in the event that you die. Before FI it would be used to provide for your family's needs. After you are FI, there isn't much "need" for it. I dropped all my term coverage once I was FI.

I still keep a small whole life policy that is so old it is actually providing me with a decent return (~6%) plus "free" insurance coverage. In the back of my mind once the time comes of me to take my pension I may elect the single life option and keep the insurance and the proceeds would provide a continuing benefit to DW in the event that I passed.
 
I cancelled my life insurance right before I retired. My main reason for carrying it was the living benefit available in case of a terminal illness. Now I have a pension so will have that income as long as I live and I have no family that I need to support after my time is up.
 
Hamlet said:
It would be interesting to see someone work out whether the last few years of a level-premium life insurance policy are potentially profitable to continue paying as an "investment" beyond needing the insurance coverage.

Obviously, if you have a 20 year term life policy with level premiums, the insurance company makes more money on the earlier years than the later years, since the older you get the more likely you are to die (on average).

Does it typically reach a point in the last few years where you should keep paying the premium as an "investment", even if you no longer need any insurance?

Certainly for people whose health has gotten bad, or for people who are making dangerous lifestyle choices it makes sense to keep paying the premiums.
Click to expand...

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.
 
DH and I both got 20 year term policies in 2000 at age 45. They are small policies (mine is for $100,000 for $14/mo and DHs for $250,000 at $53/mo) and inexpensive so for now we are keeping them.

DH retired in 2010 with a COLAed pension that covers all our monthly expenses with a little savings leftover and I have a minimal part-time job. We may not NEED the life insurance (we are debt free including the house, 2 kids completed college and are self sufficient) but for the low cost we are keeping the term life insurance policies. If he died I'd still get the pension at 100% survivor rate but I'd like to have the additional money for security. If I died his pension increases to the single amount but it would be nice for him to have an extra $100K. He may want to make a move to be closer to his family.

At age 65 the renewal will be very expensive and we will drop the coverage then.
 
I kept a little term on DW and about 3x more on me. We did not elect to pay into the Survivor Benefit Program when we retired from Military Service. Guess we are hedging a bit. Funds are meant to pay off mortgages and help adjust to life with reduced income coming in. Since we rely on pension income only at this point.
 
Alan said:
We have insurance on my life as DW will only get 50% of my pensions.
Click to expand...


That'll pretty much be our situation. DW sill get 55% of both of my pensions...federal & military. Haven't yet decided how much insurance I'll keep once I retire around this time next year. Once she reaches age 62, she will also get her own small SS benefit. House will be paid off and we're planning to stay out of debt. We'll both have health insurance, that will continue for her if I die first.
 
Thanks for all the replies.

When I bought the policies, I wasn't sure what $$ shape we were in. I was just working it. Now, I've crunched a bunch of numbers.

I probably overprotected myself due to my dad passing away at age 48 and wanting to avoid the same mistake of not leaving a cent to a younger family. Also, DW's family has a history of cancer, so I wanted an emergency blanket. It's not super popular here, but I'm willing to passing a nice chunk of change to my kids if I passed prior to 60. That's just me.

It's funny that I use age 95 for the retirement calculators and not think twice about it, but betting on not living pass 60 or 70 via term life insurance.

I'll have to think long and hard when the next renewal notice comes in. Thanks for the feedback.
 
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