who needs stinking insurance?

[bingybear]

Both of us are approx 54, kids grown and on their own. we are both FI, but DW is RE and I have 2 more weeks until RE.

We have 10k joint whole like policy and each have a 300k term policy.

We are considering letting the terms lapse and converting the whole life's cash value to a variable annuity.

How do you decide when to terminate insurance... or if you should terminate insurance? What parameters would you use in the decision?

 

[athena53]

I've always had only the life insurance provided by employers since their policies have been pretty generous. Never bought additional on my own. I retired last year at 61; DH was 76. Either of us will be just fine living on the current assets and income (he gets SS, I get a small pension) so I haven't gone looking for life insurance.


If I'd lacked employer-provided coverage, I probably would have dropped any private coverage after DS was out of college and the assets looked like enough to support DH. Your situation could vary depending on what you might want to leave your heirs. DS says he doesn't want anything, but there should be enough left after I'm gone to help with his kids' education if they're still in school. I'd like to be able to help with that.

 

[pb4uski]

I dropped my term once I was FI. If either of you are in poor health or if you want to leave a legacy to your kids, if the term is cheap then you might keep it, otherwise I would drop it and avoid that cost.

The whole life is a different decision. For mine, the ~4% interest rate implicit in the annual growth in cash value is actually a good rate of interest given the negligible credit risk, lack of interest rate risk and good liquidity so I'm keeping it, not for the insurance protection, but as a small part of my fixed income portfolio.

If you convert the whole life, don't go into a VA... just cash it out.

 

[BellBarbara]

We let ours go too. No real need.

 

[bingybear]

The whole life is a different decision. For mine, the ~4% interest rate implicit in the annual growth in cash value is actually a good rate of interest given the negligible credit risk and lack of interest rate risk so I'm keeping it, not for the insurance protection, but as a small part of my fixed income portfolio.

If you convert the whole life, don't go into a VA... just cash it out.

I will have to check the interest rate and how continuing or not continuing payments work. I've not wanted to cash it out due to high tax rate... although this may change in RE. do you think even with the low expense of a fidelity or vanguard, that I should avoid them altogether?

 

[MichaelB]

How do you decide when to terminate insurance... or if you should terminate insurance? What parameters would you use in the decision?

I had term insurance for many years, dropped it when our assets were sufficient to provide for our children's college and a modest but adequate life for DW.

One of my guiding financial principles: Always make sure to be worth more alive than dead. There is no point in creating needless opportunity and motivation.

 

[pb4uski]

I will have to check the interest rate and how continuing or not continuing payments work. I've not wanted to cash it out due to high tax rate... although this may change in RE. do you think even with the low expense of a fidelity or vanguard, that I should avoid them altogether?

You can get an idea of the interest rate by looking at your last annual statement. Take the cash value at the end of they year divided by (the cash value at the beginning of the year + 50% of the premiums you paid) and then subtract 1. That is your approximate interest rate.

If the amount involved in not much (as a 10k life policy would suggest) I would not bother with a VA. Just wait until you retire and are presumably in a lower tax bracket to cash it in. The tax will be on the "inside build-up" (the cash value less the premiums you have paid since the beginning).

I would avoid VAs altogether.

 

[Closet_Gamer]

If you don't need the term insurance, punt it. Insurance is a highly important aspect of a financial planning but by definition a bad investment as the actuarial work favors the insurance company making money. Insure what you need to.

Perhaps take the term life insurance costs and use them to obtain/expand an umbrella liability policy instead. Protect what needs protecting. We just did that with an auto-for-umbrella swap...the old van isnt worth insuring for collision anymore so we dropped that and used the monthly cost to expand our umbrella which had not kept up with our net worth expansion.

I have no experience with whole life so I'll keep my yap shut on that

 

[H2ODude]

Dropped the term (on me) once the kids graduated college. At that point while DW would have had to keep working if I croaked, she'd have been fine. Once FI I see no need for it.

 

[fritz]

Carried level term insurance (originally to cover mortgage+ on first home over 35 years ago). Dropped it during 2nd home time frame (+30years ago) as we carried no mortgage on 2nd home, and had sufficient funds saved for future needs that exceeded the policy value.

Along the lines of the comment by MichaelB - better to be worth more alive than dead as one goes through life (a much happier outlet IMHO).

 

[user5027]

I was just in a similar situation.

I would go get medical physicals and be up front with the provider and tell them, "I am considering cancelling my life insurance. If you tell me I have six months to live, I'll pay the premium."

Let them run all the appropriate tests.

 

[Rusty]

No real need for life insurance if you're FI and have nobody depending upon your income for their survival. Kids that have moved out and who might be hoping for a big payday when Dad croaks deserve to be disappointed.

Been ratcheting down my coverage over the years as we approach retirement and the college bills for the kids are paid in full. Another 5 to 10 years, no plans for any life insurance at all.

It goes without saying, but as a matter of self-preservation NEVER let your family know how much you're worth if you suddenly, unexpectedly, kick the bucket.

 

[aja8888]

It goes without saying, but as a matter of self-preservation NEVER let your family know how much you're worth if you suddenly, unexpectedly, kick the bucket.

Well, at least leave them a hint as to where all the paperwork is.

 

[user5027]

My wife always jokes whenever I am about to do anything somewhat dangerous, "Wait! Let me call (agent's name) and make sure the insurance is paid first."

 

[Mulligan]

Carried level term insurance (originally to cover mortgage+ on first home over 35 years ago). Dropped it during 2nd home time frame (+30years ago) as we carried no mortgage on 2nd home, and had sufficient funds saved for future needs that exceeded the policy value.

Along the lines of the comment by MichaelB - better to be worth more alive than dead as one goes through life (a much happier outlet IMHO).

I agree. Plus, life insurance is making a bet that you don't want to win. Besides the insurance companies have made boatloads of money over the years betting on you living. I want to be on that side of the bet myself.


Sent from my iPad using Tapatalk

 

[Brett_Cameron]

I dropped life insurance when the premiums started that exponential climb skyward and I was FI.

 

[Rusty]

Well, at least leave them a hint as to where all the paperwork is.

To: My CrotchFruit
Fr: Your Croaked Daddy Rusty
Re: My Life Insurance (Good Luck)

Remember all the times I asked you to shovel the driveway so that me and your Mom wouldn't throw our backs out, and you said "Meh" and kept on playing your video games?

Remember all the times I asked you to put your damn dirty plates in the dishwasher, and you just laid them in the sink, just one foot away?

Remember all the times I tried to teach you to cook, and all you said instead as I walked in the door is "what's for dinner", after you've been home all damn day doing Lord Knows What?

Remember how you begged us for dogs, but acted like their poop in the yard was Plutonium and would kill you dead instantly if you dared to pick it up?

Well, Boo From The Beyond, I'm busy hanging with Anna Nicole Smith, and any money that you might be expecting to collect ... "Meh".

 

[Niuatoputapu]

Agree that the "need" for life insurance disappears with FI. Like RE, term LI can be subject to OMY. Although I reduced the payoff amount over the years, I did OMY on my term LI in conjunction with OMY of w*rk, which was probably silly because DW would easily survive with a nest egg built for two.

 

[GravitySucks]

We lowered coverage over the years as the responsibilities faded away. (When each daughter went independent). Keeping enough for DW to salsa across the Caribbean with her grief counseled Raul.

After DW passed I dropped all life insurance except for my retiree benefit which is enough to put me in the ground and buy a keg for the mourners.

No point in ever being worthier dead than alive.


Sent from my iPhone using Early Retirement Forum

 

[bingybear]

You can get an idea of the interest rate by looking at your last annual statement. Take the cash value at the end of they year divided by (the cash value at the beginning of the year + 50% of the premiums you paid) and then subtract 1. That is your approximate interest rate.

If the amount involved in not much (as a 10k life policy would suggest) I would not bother with a VA.

cash value is about 10k. From your explanation, the insurance would still be costing 50% of the premiums. Not sure if 4% interest is worth that. For tax and subsidy reasons, it may pay to push it into next year

 

[athena53]

Last year when I was still employed and doing my taxes, I found that I had $2,400 of "imputed income" from employer-provided life insurance with face value over $59K. I realized I'd save a few hundred bucks. I asked if I could drop it and they told me I had to wait till the next open enrollment period, which would have been this January. Happily, I was going in May so it was no longer a problem.


Something to watch out for if you're still employed and don't need the extra coverage.

 

[bingybear]

Last year when I was still employed and doing my taxes, I found that I had $2,400 of "imputed income" from employer-provided life insurance with face value over $59K.
Something to watch out for if you're still employed and don't need the extra coverage.

Mine was only $226 for a face value double yours. But RE is 2/27/15... so not much I can do with that now.

 

[walkinwood]

ESPlanner has a feature that allows you to understand what your "living standard" will be if one of you bites the dust early. While I've never found the exact numbers particularly compelling, the relative amounts are sometimes eye opening. ie. how much lower would your income be if one of you dies in a certain year. Most obvious impacts are pensions, SS & tax rates.

 

[Cobra9777]

During our working years with kids, we carried term life insurance roughly equal to the mortgage balance. Theory was the survivor could easily get by without a mortgage payment. We both worked and also had coverage through our employers (typically one year's salary). When I retired, we paid off the mortgage and canceled the term policy. Last of the offspring had just graduated college as well.

 

[bingybear]

ESPlanner has a feature that allows you to understand what your "living standard" will be if one of you bites the dust early. While I've never found the exact numbers particularly compelling, the relative amounts are sometimes eye opening. ie. how much lower would your income be if one of you dies in a certain year. Most obvious impacts are pensions, SS & tax rates.

I saw ESPlanner mentioned in a another thread. I looked at it and ran a few cases. When we got our whole life policy (before kids), it was in case one of died... this would let the other cover immediate expenses and move on. The term was started with our first child. It was quite a bit at that time as we were in grad school. The idea was to help raise the kids if one of us passed. I'm just a little tardy on the cancelling of it.

During our working years with kids, we carried term life insurance roughly equal to the mortgage balance. Theory was the survivor could easily get by without a mortgage payment. We both worked and also had coverage through our employers (typically one year's salary). When I retired, we paid off the mortgage and canceled the term policy. Last of the offspring had just graduated college as well.

Mortgage was paid off in '93... so no need to cover that.