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Did you maintain your Term Life Insurance after ER?
Old 01-04-2012, 05:10 AM   #1
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Did you maintain your Term Life Insurance after ER?

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?
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Old 01-04-2012, 06:31 AM   #2
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I think it comes down to how much money your survivors would need to live on if you passed. Kinda like planning FIRE.
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Old 01-04-2012, 06:37 AM   #3
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If you are FI and can ER you do not need term life insurance? That make you worth more dead than alive.
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Old 01-04-2012, 07:07 AM   #4
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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!
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Old 01-04-2012, 08:37 AM   #5
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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.
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Old 01-04-2012, 09:28 AM   #6
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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
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Old 01-04-2012, 09:58 AM   #7
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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.
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Old 01-04-2012, 10:35 AM   #8
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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"...
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Old 01-04-2012, 10:40 AM   #9
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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.
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Old 01-04-2012, 10:50 AM   #10
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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.
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Old 01-04-2012, 10:54 AM   #11
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Also, we have no interest in leaving an 'estate' when we pass.
You will have an estate, even if it has only a few dollars in it ...
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Old 01-04-2012, 11:25 AM   #12
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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.
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Old 01-04-2012, 11:44 AM   #13
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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.
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"...
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Old 01-04-2012, 12:05 PM   #14
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We have insurance on my life as DW will only get 50% of my pensions.
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Old 01-04-2012, 03:38 PM   #15
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You will have an estate, even if it has only a few dollars in it ...
True, but I wasn't thinking 'estate' I was thinking 'ESTATE'!
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Old 01-04-2012, 03:48 PM   #16
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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.


Quote:
Originally Posted by samclem View Post
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.
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Old 01-04-2012, 03:56 PM   #17
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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....
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Old 01-04-2012, 04:01 PM   #18
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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.
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Old 01-04-2012, 04:12 PM   #19
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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.
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Old 01-04-2012, 04:14 PM   #20
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Quote:
Originally Posted by Hamlet View Post
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.
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.
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