Insurance is a pretty good idea for anyone whose primary asset is his or her earning potential, but who has a large, non-negotiable financial commitment that must be met regardless of what happens to the breadwinner. It's not unusual to see businesspeople or professional people who have minor children take out life insurance policies and similar to ensure that their children are provided for in case they die or become incapacitated. Prior to financial independence, it's a fairly intelligent and conservative thing to do. A family where one of the parents has fallen ill has enough to worry about: they don't need financial worries too.
For most Mustachians, the point at which the insurance no longer becomes necessary will be earlier than average due to financial independence and low consumption. Eventually our asset level reaches a point where we have such modest assets as we need, such as living space and transportation mechanisms, and where our biggest asset is not our ability to earn an income, but our Vanguard portfolio's ability to crank out a sizable enough 4% withdrawal rate. At that point the rules do indeed change, and income protection insurance becomes ridiculous. However I'd like to point out that even with low consumption there's a stretch of several years prior to FI where people have to work hard, save, and invest. Prior to that point, we're all vulnerable. A big enough storm can sink even the biggest, best-made ship.
There are always going to be people with a bigger financial burden. Maybe it's elder care. Maybe they're responsible for a handicapped sibling, or maybe one of their kids is born with severe autism. But the burden can also come from education. For any profession that's expensive to get into, there will be people who take out loans in order to participate. We've ascertained on other threads that a student loan debt of half a million USD is not at all unusual for doctors. In the United States, student loan debt also cannot be discharged through bankruptcy. If the person with the loan is married, then depending on where he or she lives and whether the debt occurred or increased after marriage, a surviving spouse can and will be held responsible for the debt. (Side note: how does this work in the UK?)
With all this in mind, a person entering the medical profession with significant student loan debt would be quite foolish to not protect his or her family, especially in a community property state where debt accrued during the marriage can and will transfer to the surviving spouse.
I'm all for paying off debt as quickly as is practical, yet I do see a market for this kind of product at least for a few years. Yet there's no reason for people to continue using it after their loans are paid off.
What I don't appreciate is when life insurance, or income protection insurance, is marketed to people who don't have minor children or dependent spouses, whose homes are paid off, and who are in a comfortable financial position. The only practical use for insurance under those circumstances is to balance out an inheritance if things cannot be easily or comfortably divided between heirs.
