Life Insurance

[golfnut]

We have had a met life insurance policy since 1986. Its called a Flexible Premium Life policy. Face value $80,000. My wife is the beneficiary. We are both in our 60s and retired. For years, we paid the min. premium $250 to keep the policy in force. Well, the policy will expire in May next year unless we up our payment to $1,050. Of course, the required premium increases year by year as we get older.


Just wondering if we should keep this policy in force. Of course, I discussed this with my wife and she really had no strong opinion one way or the other.


She did bring up looking into burial policies. I did a quick check on these products and for $10,000 policy , it was about $600 a year.


Financially, we are doing ok but lets face it $80,000 is $80,000.


Any opinions or thoughts would be appreciated.

 

[latexman]

My "retirement plan" will/should provide for DW and I, or if one of us passes, up to ages 93 for me and 95 for DW. As such, I no longer pay for life insurance. I do have one retiree life policy from MegaCorp which is free.

 

[COcheesehead]

You don’t need life insurance. You need to set aside a few bucks for burial that’s all.
My parents donated their bodies to the local med school to be used as cadavers so there were no burial costs for them. That might be an option.
Otherwise don’t spend your last $10,000 and you’ll be fine.

 

[kgtest]

.. Deleted.

My comment was essentially that life insurance companies are betting you will live, vs you betting you won't ever time you pay the premium. I would personally not pay them, and rather pay myself and invest that premium into investment accounts.

 

[rodi]

I look at life insurance as necessary if the loss of income when you die will adversely effect your surviving household. So when we were both working and had kids - we had enough to pay off the house - that was enough that the survivor could support the kids on one salary.

When we retired, even though we still had the kids under roof, we knew we didn't need to worry about replacing income - since we had no income. (And my retirement plan accounted for lost SS for the deceased.) At that point we dropped insurance.

If your retirement plan accounts for loss of SS/Pension when one of you dies, and you'll be fine, then you don't need insurance. If you haven't accounted for that - then the insurance can take care of the loss of income.

 

[mrfeh]

Our 20 year term policies will be expiring in a couple years, when we are 58. That will be the last time we carry life insurance.

Unless the $80K would make a significant difference in your wife's standard of living, I'd drop it.

 

[athena53]

I look at life insurance as necessary if the loss of income when you die will adversely effect your surviving household.

<snip>
If your retirement plan accounts for loss of SS/Pension when one of you dies, and you'll be fine, then you don't need insurance. If you haven't accounted for that - then the insurance can take care of the loss of income.

Yes, I was going to mention SS. It's sad to see how many widows (since women are more likely to outlive their husbands) struggle after their husbands die and the household SS income is reduced by 1/3. Life insurance could provide a cushion if SS is going to be the only income in retirement.

I had term life through my employers but didn't replace it when I retired at 61- there were enough savings that we didn't need it.

 

[nobody]

I'd ditch the life insurance plan.

Check out https://funerals.org/ they are a Funeral Alliance group if they are in your area a nominal fee per year can get you big discounts. Website also has a lot of good tips.

 

[kgtest]

My DS recently passed away.

She opted to let the local University students use her cadaver to learn and educate, getting a free cremation for doing so.

The plot she purchased by the cemetery close to my DM and DF was $600.

Her celebration of life party was another $600 and I believe close to 100 people came to celebrate, eat and grieve.

Her headstone was the most expensive thing, I believe it cost about $1000 to 1500.

My other DS did spent some time hiring lawyers and accountants to help with the estate and taxes. That just came out of her investments/cash she had accumulated. Maybe another $3,000.

All in this is still under $10,000. Just to give an idea of what it costs.

FWIW she did have a life ins policy that was through her ex-employer but I believe she didn't pay much at all for that. I believe it paid out roughly $100,000 and went to the named beneficiary on the policy. Unfortunately she had 3 children but only the eldest was on the policy as a beneficiary. Its fine as the estate will take that in to consideration when everything is divvied up throughout time.

 

[pacergal]

We stopped our life insurance shortly before we retired--kids were grown and we didn't need it.

 

[The Cosmic Avenger]

Same as Rodi, we have term life while we're working to help with income replacement. We could even cancel it now that we are pretty much FI, but our premiums are low, $467/yr for $500K of coverage, so we're ready to drop it, but we've decided to keep it for now while we are working and have college tuition payments.

 

[PatrickA5]

I dropped my insurance probably 10 years ago when it got too expensive and I figured out we didn't need it.

We also preplanned/prepaid for our funerals/burials. Nothing for our survivors to do other than show up if they feel like it.

 

[brett]

I reduced my insurance significantly as our children left home and as our financial situation changed.

By the time I retired early I had very little term insurance through my employer. Now retired my pension provides $15K for me, $0 for my spouse.

We view insurance as a hedge against risk. We no longer have that financial risk.

We stopped paying term life premiums 10 plus years ago. Term life was the only insurance that we ever considered or purchased.

 

[Sunset]

.............
We also preplanned/prepaid for our funerals/burials. Nothing for our survivors to do other than show up if they feel like it.

From handling my DFIL funeral, where he had a pre-paid contract. I can say that some employees at the funeral home may take advantage of the fact that family often does not understand the details of the plan.

This allows the funeral home to double charge or up charge for things already paid.

Our actual "contract" is a 1 sheet paper with check marks and notations for various line items, not really clear.

It would be educational to review the plans with the actual papers to show the expected executor what is planned and paid.

Had my DFIL done that , I would have had less discussions and no need to review the State laws affecting funeral contracts.

 

[Scratchy]

Since you've already gone through underwriting, if the life expectancy of the insured at this point is significantly less than average for age that would be one factor in favor of maintaining the policy.

 

[OldShooter]

It's been decades since I let my term life lapse. Kids gone, DW making very good salary, net worth growing, there was simply no need.

@golfnut, your answer really depends on your financial situation. If a death benefit would significantly improve your wife's financial situation or be critical for her that is much different that it being a drop in the bucket. Burial policy same answer, except that I think these tend to be overpriced and very profitable for agents and companies. If you really need that insurance, you might be better off just buying a small term life policy, enough to pay final expenses.

The fact that you and DW are neutral on keeping the policy would tempt me to conclude that you don't need it.

 

[Green Papaya]

We had a standard term life policy through work (free of cost), another much larger term life policy, and a small convertible whole life policy. We canceled the large term life policy a year prior to retirement since kids were grown and no risk to our financial situation if I had lost my job then. I still carry the convertible whole life policy, paying very little monthly but its cash value increases about 5% annually. Thinking of it as portion of my "bonds" allocation, and I can cash it out any time I want to.

 

[golfnut]

Thanks to all who responded. The ss angle give me more to think about, If I kick off bf the wife, the ss gets reduced by $14,000 . The $80,000 would buy her 5-6 yrs.



Boils down to - is the annual cost to maintain the policy worth it? I am 3 yrs older and good chance I'll be looking up at the daisies before her.

 

[PatrickA5]

From handling my DFIL funeral, where he had a pre-paid contract. I can say that some employees at the funeral home may take advantage of the fact that family often does not understand the details of the plan.

This allows the funeral home to double charge or up charge for things already paid.

Our actual "contract" is a 1 sheet paper with check marks and notations for various line items, not really clear.

It would be educational to review the plans with the actual papers to show the expected executor what is planned and paid.

Had my DFIL done that , I would have had less discussions and no need to review the State laws affecting funeral contracts.

My "death" book has everything laid out including a list of items that could potentially be higher when the time comes - such as death notice in the paper, flowers, death certificates, sales tax on casket, etc. The vast majority of the funeral/burial is locked in and shouldn't change.

My DF did something similar about 20 years before he died and the process couldn't have been easier when the time came.

 

[Koolau]

Heh, heh, I'm keeping my similar policy in force as I'm now a bad risk. Age and "conditions" would prevent me from getting life insurance now. Good news - I had put in enough along the way and the extra grew enough to last me until early 80's without increasing my modest premium. YMMV

 

[Sunset]

Thanks to all who responded. The ss angle give me more to think about, If I kick off bf the wife, the ss gets reduced by $14,000 . The $80,000 would buy her 5-6 yrs.



Boils down to - is the annual cost to maintain the policy worth it? I am 3 yrs older and good chance I'll be looking up at the daisies before her.

If you took the $1,050 each year (increased for inflation) and put it into a stock account of VTI or VWELX or QQQ,
It would be based on back testing be worth more than $80K in 20 yrs.

The best would according to backtesting be a mix of all 3 equally.

https://www.portfoliovisualizer.com...cation2_3=33.3&symbol3=QQQ&allocation3_3=33.3

 

[gcgang]

Although it’s not a huge DB, before you cancel you might check with some of the viatical settlement companies.

 

[Finance Dave]

I look at life insurance as necessary if the loss of income when you die will adversely effect your surviving household. So when we were both working and had kids - we had enough to pay off the house - that was enough that the survivor could support the kids on one salary.

When we retired, even though we still had the kids under roof, we knew we didn't need to worry about replacing income - since we had no income. (And my retirement plan accounted for lost SS for the deceased.) At that point we dropped insurance.

If your retirement plan accounts for loss of SS/Pension when one of you dies, and you'll be fine, then you don't need insurance. If you haven't accounted for that - then the insurance can take care of the loss of income.

+1

 

[Koolau]

If you took the $1,050 each year (increased for inflation) and put it into a stock account of VTI or VWELX or QQQ,
It would be based on back testing be worth more than $80K in 20 yrs.

The best would according to backtesting be a mix of all 3 equally.

https://www.portfoliovisualizer.com...cation2_3=33.3&symbol3=QQQ&allocation3_3=33.3

I see an issue with this plan.

In early 60s, how many of us have 20 years left? SWAG - half.

In my case, mentioned above, it's sort of a Las Vegas type mental calculation. My chances of living to a (really) ripe old age are not good. Keeping up my policy - even if I don't officially "need" it to protect DW is a "good bet." I'm guessing OP has some of the same issues (at least age) which would prevent obtaining a similar policy now.

So roughly a $1000/year against $80K might be a good "bet." YMMV

 

[PatrickA5]

My dad had a couple of small policies that he paid monthly for a whopping 57 years! I started looking over his finances when he was 85 and noticed a letter from the insurance company congratulating him on 50 years of "making good financial choices".

I finally talked him into cashing the policies and quit messing with the small monthly payments. I calculated that he'd paid about $40K in premiums on each $25K policy. He ended up getting $23K from each. The hard part was figuring out which insurance company to contact since it'd changed hands several times over 57 years.