Just retired... cancel term life?

[Debinnov a]

DH and I just retired. We both have $250k term policies and I always assumed once we retired, I should cancel them. We probably will have approx. $2.5M nest egg when all is said and done. The recurring monthly charges seem silly - DH is 50 and premium is $164 mo. Not sure what mine is but we are trying to really lower expenses. No kids at home or dependents.

Would love to hear what others have done.

Thanks!

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[SevenUp]

Did exactly what you assumed: canceled, for all the reasons you list and imply.

So far so good.

 

[Lancelot]

Easy decision for me- I'm single

 

[EastWest Gal]

I haven't retired but I cancelled when my premium was due. The reasons for having life insurance no longer exist.


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[Bryan Barnfellow]

Great timing. Just today received my annual bill. One more year to go and then I'm done. My plan is to jettison the term life this time next year. Our assets are sufficient.

-BB

 

[EastWest Gal]

All you have to do is not pay the bill and it will be cancelled.


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[racy]

Hi Deb,
If you're not insuring against a loss of needed income, then you don't need 'life' insurance. Since you're examining expenses, have you looked at car insurance lately? (ie paying comprehensive on an old car?)

 

[pb4uski]

I cancelled long before I retired as I no longer needed the coverage.

 

[HillCountry]

What was your plan when you bought the policy?

Both DW and me got $500K for 20 years after my first kid's birth. We don't need the policies now. But most likely we will keep them, as they are pretty cheap.

 

[BTravlin]

Retired last year and let my 20 year term policy lapse a few months ago. No need for the protection anymore.

 

[Tandemlovers]

I cancelled my term policy this year as well for all of the above reasons
and because it covered accidental death, but not death from disease
or natural causes, the likelier outcome at my age.

 

[martyb]

Retired yesterday (wife still working). I haven't dropped altogether, but greatly reduced, down to just above burial amount. Not a big cost. Once all of our retirement monies come on line & wife stops working (2-3 yrs) probably will drop the rest.

 

[MichaelB]

I carried life insurance until a few years before retiring. One important rule in my life:

Always be sure you're worth more alive than dead. It doesn't make any sense to motivate others if it ain't in your best interest.

 

[Al in Ohio]

Since term life is meant to replace loss of income you obviously should cancel when you stop working. I actually set up laddered 10 year term life policies and cancelled the oldest ones at intervals as I got closer to FIRE. I will cancel my sole remaining policy ONE year before my FIRE date as my employer has a benefit of one year salary for my beneficiaries in case of death.

 

[calmloki]

Retired yesterday (wife still working).......

Well you just have a great Independence Day, you hear? Congratulations!

 

[Tractor guy]

My old employer provided a policy that gave me 2X my salary. I came close to cancelling it a year after I retired but have decided to keep it as an investment for my heirs.

The premium is very low. I've got enough funds that the payment is not needed for anything else. I'd be investing it for long term return anyway. I calculated a return on my total payments going forward and assumed it would pay out in less than 40 years (I'm 62). I didn't think I could match that return.

Of course, the picture wouldn't look so good if I included the payments for the last 28 years when I was working. However, these are sunk costs and were paid by my employer anyway.

Edit: I may have to rethink cancelling this policy. I redid the calculation & got a 3.66% ROI if I live for 30 years. That's better than any other guaranteed investment right now but probably not better than my total portfolio will do.

 

[fritz]

I cancelled long before I retired as I no longer needed the coverage.

+1

 

[DFA]

We are going to keep ours until all income streams come on line and then re-evaluate; the premiums are pretty cheap if we keep it too.

 

[martyb]

I probably should have mentioned that although I'm now retired, we still have a mortgage. I'm planning/hoping to be able to either pay it off or at least get it substantially reduced within the next 3 yrs. Once that's done, there most likely won't be a need for life insurance at all after that.

 

[Derslickmeister]

Yep, sounds pretty silly to keep paying for that term given your current assets. Sounds like you are self insured now. You didn't mention any debt, I'm assuming its minimal if not nonexistent.

 

[Animorph]

I cancelled mine shortly after retirement.

One reason to keep it would be if one spouse is financially strapped if the other one dies. If DW dies, her pension will probably go away (don't think I'll go joint life, she's 5 years younger than me), along with her SS. That leaves me a little worse off than she would be if I died. However, I'm the financial planner and figure I can get by fine with less. So no life insurance for us.

 

[catotx]

If this is a term policy with fixed yearly payments, it actually becomes "cheaper" when you get older. For example, you might be paying $500 a year for a 25-year term. The coverage you get for the $500 at 30 years old is the same as when you are 50 years old, making it relatively cheaper as you get older.

 

[Debinnov a]

Thanks for the responses! Yep, no debt really except one mortgage and that will go away when we retire and purchase final home with cash.

I was thinking that the amount we are paying now for our life insurance could go towards a long term care policy. I keep going back and forth on LTC, but I tend to rather be safe than sorry. DH diagnosed with Type 2 Diabetes and both of us have some other minor health issues so LTC probably makes sense.

Deb

 

[martyp]

I would think is depends on why you bought the term life insurance in the first place. If that need is still there then keep it. If not then cancel it.

I bought term life insurance when we first bought our house. The purpose was to enable one of us to keep the house if the other one died. Once our incomes were high enough so that that was no longer an issue we cancelled the insurance. That was 20 yrs ago.

 

[rrppve]

Given that the death benefit is only 10% of your net worth, it doesn't make sense to keep paying the premium from a financial planning perspective. However, your current age and health circumstances may make it a decent investment, if you bought it a while ago and your health has declined, albeit one that I'm sure the beneficiary would prefer not to collect on.


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