Author Topic: Life insurance: What is your Mustacian logic for having or not having it?  (Read 75285 times)

boarder42

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i wasnt sure how far YOUR sentintimentality went and what would throw you into a manic depressive state you could no longer live.  Death is a part of life and dealing with that is a part of life, if someone is that unstable that a death of a relative would end them up that way then i guess you've got me you should carry a huge insurance policy on any person place or thing that if gone would require you to have round the clock care in a home to keep you safe.

You don't seem that bright.  This thread was about life insurance and losing a spouse, as per the thread title and OP, not about getting shoes wet.  In what reality would you ever equate losing a spouse to losing a pair of shoes?

Thread is about life insurance in general and for your sake I hope you and you so go at the same time bc it seems we may have a nuclear meltdown on our hands if anything else happens. Also never said losing a pair of shoes and you keyed in on the one ridiculous statement I made in that post so I think someone should reevaluate their relationship with their shoes.

The point of the shoes post was to show you how absurd the thought that one would emotionally combust over the loss of another human.  Your shoes will out live both of you.  They likely have rubber in them.  Humans live and die it's a fact. To completely lose sense of ones self over the loss of another human is as absurd to me as throwing away a pair of shoes bc you stepped in a puddle.
« Last Edit: April 30, 2016, 08:25:35 AM by boarder42 »

ender

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i wasnt sure how far YOUR sentintimentality went and what would throw you into a manic depressive state you could no longer live.  Death is a part of life and dealing with that is a part of life, if someone is that unstable that a death of a relative would end them up that way then i guess you've got me you should carry a huge insurance policy on any person place or thing that if gone would require you to have round the clock care in a home to keep you safe.

You don't seem that bright.  This thread was about life insurance and losing a spouse, as per the thread title and OP, not about getting shoes wet.  In what reality would you ever equate losing a spouse to losing a pair of shoes?

Thread is about life insurance in general and for your sake I hope you and you so go at the same time bc it seems we may have a nuclear meltdown on our hands if anything else happens. Also never said losing a pair of shoes and you keyed in on the one ridiculous statement I made in that post so I think someone should reevaluate their relationship with their shoes.

The point of the shoes post was to show you how absurd the thought that one would emotionally combust over the loss of another human.  Your shoes will out live both of you.  They likely have rubber in them.  Humans live and die it's a fact. To completely lose sense of ones self over the loss of another human is as absurd to me as throwing away a pair of shoes bc you stepped in a puddle.

I'm sorry you don't have a close enough relationship with someone that you might actually be sad or emotionally affected if they die.

Life is often messy. Your previous comments about needing/wanting life insurance basically meaning you shouldn't have kids is... similarly sad to me. My wife and I bought term insurance because it means that if one of us dies when our kids are around, we can ensure our family is not hindered by money, period. It's probably overkill, especially for me as I have a nominal policy through work and probably will indefinitely and SS provides a fairly reasonable benefit.

We don't know if we would want to pay for college for kids. We don't know what elder care might be required. We don't know how many kids we might have. Our life insurance costs us $50 or so a month and ensures we won't have to worry about any of that in the event one (or both) of us dies. It means the survivor can still raise our family the way we want and not be hindered by money. It means the survivor can easily stay with the children as a SAHP.

We're not going to wait until we are 30 or 35 or 40 (or however old) and can guarantee all those things before attempting to have children.

boarder42

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i wasnt sure how far YOUR sentintimentality went and what would throw you into a manic depressive state you could no longer live.  Death is a part of life and dealing with that is a part of life, if someone is that unstable that a death of a relative would end them up that way then i guess you've got me you should carry a huge insurance policy on any person place or thing that if gone would require you to have round the clock care in a home to keep you safe.

You don't seem that bright.  This thread was about life insurance and losing a spouse, as per the thread title and OP, not about getting shoes wet.  In what reality would you ever equate losing a spouse to losing a pair of shoes?

Thread is about life insurance in general and for your sake I hope you and you so go at the same time bc it seems we may have a nuclear meltdown on our hands if anything else happens. Also never said losing a pair of shoes and you keyed in on the one ridiculous statement I made in that post so I think someone should reevaluate their relationship with their shoes.

The point of the shoes post was to show you how absurd the thought that one would emotionally combust over the loss of another human.  Your shoes will out live both of you.  They likely have rubber in them.  Humans live and die it's a fact. To completely lose sense of ones self over the loss of another human is as absurd to me as throwing away a pair of shoes bc you stepped in a puddle.

I'm sorry you don't have a close enough relationship with someone that you might actually be sad or emotionally affected if they die.

Life is often messy. Your previous comments about needing/wanting life insurance basically meaning you shouldn't have kids is... similarly sad to me. My wife and I bought term insurance because it means that if one of us dies when our kids are around, we can ensure our family is not hindered by money, period. It's probably overkill, especially for me as I have a nominal policy through work and probably will indefinitely and SS provides a fairly reasonable benefit.

We don't know if we would want to pay for college for kids. We don't know what elder care might be required. We don't know how many kids we might have. Our life insurance costs us $50 or so a month and ensures we won't have to worry about any of that in the event one (or both) of us dies. It means the survivor can still raise our family the way we want and not be hindered by money. It means the survivor can easily stay with the children as a SAHP.

We're not going to wait until we are 30 or 35 or 40 (or however old) and can guarantee all those things before attempting to have children.

Yeah it's a choice you made. We all have our opinions hense the OP asking.  You chose to have kids before you were financially solvent enough. 

AND FURTHER MORE TO PERSONALLY ATTACK MY RELATIONSHIP WITH MY WIFE IS COMPLETELY UNCALLED FOR. I NEVER SAID I DIDNT HAVE A RELATIONSHIP IN WHICH I WOULDNT BE EMOTIONALLY EFFECTED WITH A LOSS.

I SIMPLY STATED THAT ONE SHOULD COME TO THE REALIZATION THAT DEATH HAPPENS AND SHOULDNT BE EMOTIONALLY SCARRED TO THE POINT OF NOT BEING ABLE TO FINANCIALLY SUPPORT THEMSELVES AFTER THE DEATH OF A FELLOW HUMAN.

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okits

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K-ice, no one has mentioned a joint, first-to-die policy.  We got that to save on the premiums.  For about $100 a month it will pay out mid-six figures when the first of us dies (we're insured for different amounts, don't remember the exact off the top of my head.) No pay-out on the second spouse's death.

Twenty-year term, but as we accumulate assets our need for the policy diminishes.  I expect we'll cancel long before the 20 years are up.

Sure, the surviving spouse or the guardian (if we both die) could slog through just on the value of our assets, but as of right now it's not enough for FI, and whoever is left behind now has grief, bread winning, and single parenting on his/her plate (or, for the guardians, raising double the number of kids their life was set up to raise, with half those kids uprooted and in mourning.) A surviving spouse would probably have to cut back or forego the elder care responsibilities we already have (and that are expected to grow, with time).  The life insurance money frees up the time and energy a job takes and allows that to be redirected toward the family.


I suppose one is "not ready" to have kids when not FI the same way one "can't afford" a house if a mortgage is needed at the time of purchase.  So insurance premiums/mortgage interest are an expense to bring that major event from the future (when you're "ready/can afford it") to the present, in order to enjoy that major life event now (children, home ownership).  In either case, if one has carefully thought through the situation and taken proper steps to ensure a high likelihood of success in the venture, I see no reason for negative judgment on either the use of life insurance or a mortgage.  There are good arguments for children or home purchasing before you're able to fully pay in cash for either.

dagagad

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1. i die she keeps working.  - oh the emotional distress cmon man we were born we live we die its over i think she is strong enough to soldier on

Like I said bruh, you don't have a clue.  Just hope you never have to test this theory.

do you also insure your shoes incase you step in a puddle tomorrow that you dont see.

do you have insurance against yourself being fired and falling into a manic depressive state?

do you have insurance against you parents dying and the emotional distress that will cause?

do you have insurance on every one of your children(or plan to)? or your brther? or your best friend? your dog? your parrot? your fish?  every sentimenal item that could send you and your SO into a manic depression so deep you could no longer function in life?

i mean b/c thats what you're insinuating you should have as far as insurance goes with your statement.

instead of saving you should be taking out giant insurance policies incanse you incur one of these event that destory your ability to live life.

Now you've compared your wife to a pair of shoes.  On second thought I guess you're right, insurance would be a waste in your situation.  Ok, I'll stop.  You lobbed that one across home plate so I couldn't resist.

i wasnt sure how far YOUR sentintimentality went and what would throw you into a manic depressive state you could no longer live.  Death is a part of life and dealing with that is a part of life, if someone is that unstable that a death of a relative would end them up that way then i guess you've got me you should carry a huge insurance policy on any person place or thing that if gone would require you to have round the clock care in a home to keep you safe.

It's reasonable to plan the possibility of some kind of life stress breaking you. It happens to people all the time. Depression is a real thing.

I don't think anyone needs life insurance in case 100% but you should be aware that you are not immune,

ender

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K-ice, no one has mentioned a joint, first-to-die policy.  We got that to save on the premiums.  For about $100 a month it will pay out mid-six figures when the first of us dies (we're insured for different amounts, don't remember the exact off the top of my head.) No pay-out on the second spouse's death.

Twenty-year term, but as we accumulate assets our need for the policy diminishes.  I expect we'll cancel long before the 20 years are up.

I don't know how old you are or what your health is, but my wife and I pay $55 or so a month total for 20 year term and amounts of $750k/500k.

You might be seriously overpaying, depending on your insurability.

okits

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K-ice, no one has mentioned a joint, first-to-die policy.  We got that to save on the premiums.  For about $100 a month it will pay out mid-six figures when the first of us dies (we're insured for different amounts, don't remember the exact off the top of my head.) No pay-out on the second spouse's death.

Twenty-year term, but as we accumulate assets our need for the policy diminishes.  I expect we'll cancel long before the 20 years are up.

I don't know how old you are or what your health is, but my wife and I pay $55 or so a month total for 20 year term and amounts of $750k/500k.

You might be seriously overpaying, depending on your insurability.

Apologies, I meant to respond to this sooner!

We were mid-30s when we got the policy, and did shop around a little (online calculators, workplace insurance provider, broker).  At least two insurers were in this price range (we took the lowest cost option that met our needs.) DH's health very good, mine okay.  At the time $100 CAD = about $90 USD (currently $77 USD) so that does close the price gap a little.  Not sure if life insurance up here is just a less competitive marketplace (other Canadians - thoughts?)

MustachianAccountant

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I suppose one is "not ready" to have kids when not FI the same way one "can't afford" a house if a mortgage is needed at the time of purchase.  So insurance premiums/mortgage interest are an expense to bring that major event from the future (when you're "ready/can afford it") to the present, in order to enjoy that major life event now (children, home ownership).  In either case, if one has carefully thought through the situation and taken proper steps to ensure a high likelihood of success in the venture, I see no reason for negative judgment on either the use of life insurance or a mortgage.  There are good arguments for children or home purchasing before you're able to fully pay in cash for either.

+1, I hope no one bought a house with a mortgage who is making the argument that you shouldn't have kids before you're FI.

barbaz

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K-ice, no one has mentioned a joint, first-to-die policy.  We got that to save on the premiums.  For about $100 a month it will pay out mid-six figures when the first of us dies (we're insured for different amounts, don't remember the exact off the top of my head.) No pay-out on the second spouse's death.

Twenty-year term, but as we accumulate assets our need for the policy diminishes.  I expect we'll cancel long before the 20 years are up.

I don't know how old you are or what your health is, but my wife and I pay $55 or so a month total for 20 year term and amounts of $750k/500k.

You might be seriously overpaying, depending on your insurability.

Apologies, I meant to respond to this sooner!

We were mid-30s when we got the policy, and did shop around a little (online calculators, workplace insurance provider, broker).  At least two insurers were in this price range (we took the lowest cost option that met our needs.) DH's health very good, mine okay.  At the time $100 CAD = about $90 USD (currently $77 USD) so that does close the price gap a little.  Not sure if life insurance up here is just a less competitive marketplace (other Canadians - thoughts?)
German here. I'm paying 60€ per year for a 100k life insurance with a 25 year term. (Although it took me several attempts to find an insurance that would accept me without demanding extra fees for my health issues.)

MustachianAccountant

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Everyone should create a Social Security online account on ssa.gov and see the type of benefits that would be available to relatives upon sudden death. The actual number may surprise you.

I have less than three years of paying into the SS system, yet if I were to die tomorrow, my spouse and child would get $3,300/month until the child's 18th birthday. That's almost $40,000 a year, inflation-adjusted!

This is excellent information. Thank you! I had no idea Social Security would pay my wife and kids if I died. I checked my SSA account, and I'll be reducing my life insurance by quite a bit this year.

boarder42

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I suppose one is "not ready" to have kids when not FI the same way one "can't afford" a house if a mortgage is needed at the time of purchase.  So insurance premiums/mortgage interest are an expense to bring that major event from the future (when you're "ready/can afford it") to the present, in order to enjoy that major life event now (children, home ownership).  In either case, if one has carefully thought through the situation and taken proper steps to ensure a high likelihood of success in the venture, I see no reason for negative judgment on either the use of life insurance or a mortgage.  There are good arguments for children or home purchasing before you're able to fully pay in cash for either.

+1, I hope no one bought a house with a mortgage who is making the argument that you shouldn't have kids before you're FI.

news flash mortgages in today's age are more helpful at reaching FI and helping your money survive once FIREd its simple math.

Also the interest rate on a child doesnt change mortgate rates change daily, and right now its about as close to free money as you can get.

you have to have shelter you dont have to have a kid. 

But my first post about it was just as it pertained to mustachianism, as the OP asked.  And IMO its not mustachian to carry life insurance unless you have a child, but the MOST mustachian thing to do is to plan for that child so that you dont have to carry it.  plain and simple.  never once did i say you should reach FI before having a child.  Just that you should have enough money saved that if you or your spouse died when you had a child you/they would be fine.  also please look into SSA.gov.  b/c its likely more money than your life insurance pays out and its already included if you die or your spouse dies while you have a child. 
« Last Edit: May 06, 2016, 06:25:05 AM by boarder42 »

Le Barbu

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We have both a 500k term insurance for a total of 525$/year.

Our children are 9 and 12, actual debt 200k (mortgage), NW 850k and investment portfolio worth 750k. We dont plan to repay the mortgage anytime soon because it's tax deductible and we invest all we can every year.

Our plan is to reduce from 500k to 400k, then 300k, then 200k, until we are FI (5-8 years from now) then keep about 100k for each of us for few more years.

Daisyedwards800

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I had a parent who was the primary bread-winner die when I was 13.  He didn't have life insurance.  Don't risk it.

Daisyedwards800

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My wife abandoned the typical cushy office job for a low-earning career track (or lack thereof), so I considered getting some term life until we are FI.

However, I get a year of salary for free at work. That's like 3 years of living expenses for her if I were to pass. I have full confidence that she could deal with my passing and transition back into a higher paying job in that time no matter how tragic the circumstances of my death.

Even if she became pregnant tomorrow and I died the day after without having time to purchase a policy, eh, between our nest egg and Social Security payment for spouses caring for a child, she'd be more than fine, perhaps even instant-FI.

Don't do it.  Get life insurance.  If you get a cancer diagnosis and she is pregnant, you're screwed.  My mom got SS payment for us but it was not nearly enough and it's hard to ramp up your career amid horrible grief.

boarder42

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I had a parent who was the primary bread-winner die when I was 13.  He didn't have life insurance.  Don't risk it.

this is quite the blanket statement.  do you think MMM who is the primary bread winner should have insurance as well.  it is directly related to your networth, how much you spend, and how much your lifestlye would change once a person dies.

Daisyedwards800

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I had a parent who was the primary bread-winner die when I was 13.  He didn't have life insurance.  Don't risk it.

this is quite the blanket statement.  do you think MMM who is the primary bread winner should have insurance as well.  it is directly related to your networth, how much you spend, and how much your lifestlye would change once a person dies.

You cannot expect your spouse who just dealt with your death (and it may be gruesome) to suddenly double her salary.  If you are totally self-insured you don't need life insurance, but if you aren't, and you expect to have kids (or are unprotected) then you need to line up at least term insurance while you are still healthy and young.

Daisyedwards800

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Again, I said that if you ARE fully self-insured like MMM you do not need it, however the OP is NOT so she DOES need life insurance, which is what I was responding to.  Term should be enough.

boarder42

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Again, I said that if you ARE fully self-insured like MMM you do not need it, however the OP is NOT so she DOES need life insurance, which is what I was responding to.  Term should be enough.

it doesnt take but a few years to acrue enough money to be financially able to self life insure with the SSA.gov payout ontop of it.

if you're half way to fire you have enough to self insure and thats what the OP is.

« Last Edit: May 06, 2016, 10:10:59 AM by boarder42 »

okits

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Again, I said that if you ARE fully self-insured like MMM you do not need it, however the OP is NOT so she DOES need life insurance, which is what I was responding to.  Term should be enough.

it doesnt take but a few years to acrue enough money to be financially able to self life insure with the SSA.gov payout ontop of it.

if you're half way to fire you have enough to self insure and thats what the OP is.

OP gives her location as Canada.  Other Canadians, do you know if the government automatically pays out anything to spouse/kids if one parent dies?  I don't know of anything you can count on beyond the usual low-income supports (that don't require anyone to die, just be low income with kids.)

Paul der Krake

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My wife abandoned the typical cushy office job for a low-earning career track (or lack thereof), so I considered getting some term life until we are FI.

However, I get a year of salary for free at work. That's like 3 years of living expenses for her if I were to pass. I have full confidence that she could deal with my passing and transition back into a higher paying job in that time no matter how tragic the circumstances of my death.

Even if she became pregnant tomorrow and I died the day after without having time to purchase a policy, eh, between our nest egg and Social Security payment for spouses caring for a child, she'd be more than fine, perhaps even instant-FI.

Don't do it.  Get life insurance.  If you get a cancer diagnosis and she is pregnant, you're screwed.  My mom got SS payment for us but it was not nearly enough and it's hard to ramp up your career amid horrible grief.
40k/year until my child is 18 seems like a lot to me. There is a maximum family benefits of about 47k/year, which means it doesn't matter if I leave 2 orphans or 10, they will be getting 47k total. But that's an extreme case. 47k/year to raise two children is more than many families have.

StockBeard

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it doesnt take but a few years to acrue enough money to be financially able to self life insure with the SSA.gov payout ontop of it.

if you're half way to fire you have enough to self insure and thats what the OP is.
I'm with boarder42 here.
It vastly depends on where you are on your path to FI. If I died today, worst case scenario my wife would basically have to find a minimal wage job in order to keep the same lifestyle we have today. She could move to a LCOL to reduce the rent, reducing the need further. Our extended family would also be able to financially help her for a couple years if she needed extra time.

I've subscribed to life insurances before. It almost screwed my FI plans up, and some more. I'm sure there are better ones out there, but it does not make mathematical sense for me, I don't think it would for anyone who's halfway to FI.

Daisyedwards800

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agree to disagree

desertadapted

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Oh, I don't know, Daiseyedwards800.  Seems to me everyone on the thread with kids agreed with you, and was in favor of life insurance when there were dependents in the picture.  One troll does not a disagreement make. Thank you for sharing your experience with us.

StockBeard

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One troll does not a disagreement make.
There's Boarder42, MMM, and myself on the other side of the argument. Boarder42's replies might have been excessive, but I think you're pretty quick in dismissing the other side here.
MMM has a son, I have 2 kids. MMM has called insurance a "tax on people who are bad at math", the link to his article has been posted somewhere in the thread, but here it is again: http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

Again, to me it depends on how close you are to financial independence.
Can we agree that a couple who are financially independent do not need life insurance? Independently of their kids' situation, if all their expenses are covered without work, the death of one of the spouses has no financial impact on them.
So clearly there's a point at which one does not need Life insurance anymore. Is that point when you're full FI? when you're halfway there? I think that's what the discussion is about here.

boarder42

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One troll does not a disagreement make.
There's Boarder42, MMM, and myself on the other side of the argument. Boarder42's replies might have been excessive, but I think you're pretty quick in dismissing the other side here.
MMM has a son, I have 2 kids. MMM has called insurance a "tax on people who are bad at math", the link to his article has been posted somewhere in the thread, but here it is again: http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

Again, to me it depends on how close you are to financial independence.
Can we agree that a couple who are financially independent do not need life insurance? Independently of their kids' situation, if all their expenses are covered without work, the death of one of the spouses has no financial impact on them.
So clearly there's a point at which one does not need Life insurance anymore. Is that point when you're full FI? when you're halfway there? I think that's what the discussion is about here.

yeha i posted that link long ago ... haha

i'm not trolling i just hate seeing people throw money in the toilet.  and life insurance for most people here is doing just that.  just like i hate seeing people pay down low cost mortgages. 

i mean there is a difference between feeling safe and actually being safe. 

if you have no dependants you have no need for insurance IMO. 

if you have a kid and you are an american you have little to no need for insurance due to the SSA. 

i mean what kinda lifestyle are you guys trying to support on 47k a year.  i mean its bleak to think about. but if my spouse died and i was getting 47k a year i'd be FIREd.  and unless you're in the early stages of wealth building - ultra early you should have a couple hundred K in the bank that will grow those 18 years for you.  leaves you with 27k a year to spend when the kids are gone. 

this is piles of money by mustachian standards and assumes you quit working the day your spouse dies to take care of your kids.
« Last Edit: May 06, 2016, 01:58:37 PM by boarder42 »

CanuckExpat

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Can we agree that a couple who are financially independent do not need life insurance? Independently of their kids' situation, if all their expenses are covered without work, the death of one of the spouses has no financial impact on them.
So clearly there's a point at which one does not need Life insurance anymore. Is that point when you're full FI? when you're halfway there? I think that's what the discussion is about here.

I'm on board with you. Wife and I have a toddler, we don't have paid life insurance and never have, except perhaps what is offered "free" through our employers while working there.

boarder42

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Can we agree that a couple who are financially independent do not need life insurance? Independently of their kids' situation, if all their expenses are covered without work, the death of one of the spouses has no financial impact on them.
So clearly there's a point at which one does not need Life insurance anymore. Is that point when you're full FI? when you're halfway there? I think that's what the discussion is about here.

I'm on board with you. Wife and I have a toddler, we don't have paid life insurance and never have, except perhaps what is offered "free" through our employers while working there.

i'll try to put some math to it tonight b/c i'm sure its easily just a function of what your savings rate is compared to what you have saved compared to what your spouse will do when you pass. ie a tax on people who are bad at math.

SomedayStache

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As the single breadwinner for my family of 5 (with 3 children under the age of 8) I took out a 20 year term policy on me that is enough for my family to continue doing what they do.  My husband has no skills that will enable him to get a similar paying job to mine, and if he were to suddenly be a single parent would find it difficult to continue working at his low-paying job.  I cancelled the life insurance offered through my employer because I got a better deal in the private market.

I also took out a long-term disability policy on myself.  This one is more expensive and I plan to drop it once our finances are in a better place and we could continue to pay bills and stay in our house if I were unable to work for more than 6 months.  (Hiya Boarder42!  I guess my family is one example of Idiocracy in action.  How dare we have children without being financially independent?!)

My husband has a smaller value term life policy that we obtained right before our first child was born.  I'm glad to have it because if he were to die I would suddenly have throw money at a lot of things he does (chauffeuring kids to school, preparing home-cooked meals, yard-work, housework--I mean I feel absolutely busy and overwhelmed with life as it is.  Having to do it all alone is inconceivable.)  If he dies I would be devastated.  I probably wouldn't be able to get out of bed for weeks or months.  My job is barely tolerable because I know that I am supporting my family but I don't think I'd be able to tolerate it in the throes of grief.  When I was able to return to work I might want to pursue something more meaningful but lower-paid.

-What would your spouse and child do if you died tomorrow?  Depending on how you answer this question you might want some term life insurance.
-What would you do if your spouse died tomorrow?  Term life for them?
-What if one of you becomes sick and is in the hospital for multiple months?  I watched a cousin with 4 children still in the home go through this last year.  His wife was in and out of the hospital and hospice for over a year before she died.  Luckily she wasn't the main breadwinner, but the loss of her income + medical bills + becoming a caregiver for his terminally ill spouse and eventually becoming a single father was not an easy time for my cousin.  Watching this trainwreck was what pushed me to get long-term disability.

Interested in seeing the math that Boarder42 promises us.

boarder42

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As the single breadwinner for my family of 5 (with 3 children under the age of 8) I took out a 20 year term policy on me that is enough for my family to continue doing what they do.  My husband has no skills that will enable him to get a similar paying job to mine, and if he were to suddenly be a single parent would find it difficult to continue working at his low-paying job.  I cancelled the life insurance offered through my employer because I got a better deal in the private market.

I also took out a long-term disability policy on myself.  This one is more expensive and I plan to drop it once our finances are in a better place and we could continue to pay bills and stay in our house if I were unable to work for more than 6 months.  (Hiya Boarder42!  I guess my family is one example of Idiocracy in action.  How dare we have children without being financially independent?!)

My husband has a smaller value term life policy that we obtained right before our first child was born.  I'm glad to have it because if he were to die I would suddenly have throw money at a lot of things he does (chauffeuring kids to school, preparing home-cooked meals, yard-work, housework--I mean I feel absolutely busy and overwhelmed with life as it is.  Having to do it all alone is inconceivable.)  If he dies I would be devastated.  I probably wouldn't be able to get out of bed for weeks or months.  My job is barely tolerable because I know that I am supporting my family but I don't think I'd be able to tolerate it in the throes of grief.  When I was able to return to work I might want to pursue something more meaningful but lower-paid.

-What would your spouse and child do if you died tomorrow?  Depending on how you answer this question you might want some term life insurance.
-What would you do if your spouse died tomorrow?  Term life for them?
-What if one of you becomes sick and is in the hospital for multiple months?  I watched a cousin with 4 children still in the home go through this last year.  His wife was in and out of the hospital and hospice for over a year before she died.  Luckily she wasn't the main breadwinner, but the loss of her income + medical bills + becoming a caregiver for his terminally ill spouse and eventually becoming a single father was not an easy time for my cousin.  Watching this trainwreck was what pushed me to get long-term disability.

Interested in seeing the math that Boarder42 promises us.

Again op post is what's the mustachian thing to do. And outsourcing insurance on your life is unmustacian. So is owning a boat. I own a boat I don't come on here and try to tell you all why I own it and that it's a necessary.

It was a choice you made to have kids before you could financially support them if you were to die and now you're paying extra to insure them incase you do die.

Just like it's my choice to own a boat and insure it. But it's NOT mustachian.

desertadapted

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There's Boarder42, MMM, and myself on the other side of the argument. Boarder42's replies might have been excessive, but I think you're pretty quick in dismissing the other side here.
MMM has a son, I have 2 kids. MMM has called insurance a "tax on people who are bad at math", the link to his article has been posted somewhere in the thread, but here it is again: http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

Again, to me it depends on how close you are to financial independence.
Can we agree that a couple who are financially independent do not need life insurance? Independently of their kids' situation, if all their expenses are covered without work, the death of one of the spouses has no financial impact on them.
So clearly there's a point at which one does not need Life insurance anymore. Is that point when you're full FI? when you're halfway there? I think that's what the discussion is about here.


From a thread perspective, the issue is one of tone.  And that tone is lacking.   Too often what’s considered ‘Mustachian’ seems to veer into a frigid Objectivism.  Listening to SomedayStache’s example of the impact of death and medical bills on a family, and proceeding to compare the insurance decision to owning a boat is a continuation of the poor taste.  What I’ve typically enjoyed about MMM, and most of the forums, is that although there is a fair amount of ridicule of extreme consumerism, they are generally not totally lacking in empathy.  I don’t believe it advances the debate to minimize the actual experiences of those on this thread who had the misfortune to learn firsthand what SS covers for a family after the death of a parent, and deliver a scold about how the surviving family members should (have) toughen(ed) up and be more ‘Mustachian.’   

From my limited point of view, life insurance when you have dependents is a form of income replacement, that for me would cover college as well.  Sure, when I am FI, I will cancel my policy (as primary wage earner, I’m insured for far more than my spouse).  Sure, there is some continuum between 50% and 100% FI where I will be able to step down my coverage.  That strikes me as common sense.  Doing without life insurance for your dependents when you’re not FI?  Fine, if you and your spouse are in agreement (a critical point).  It’s your choice, particularly if you have relatives who will pay for college for your surviving kids or you’ve concluded it’s not ‘Mustachian’ to pay for all/part of college.  Waiting until you’re FI to have kids?  Well if that’s what you want and you have found a spouse who agrees (and it’s biologically feasible to wait), more power to you.  In any way implying that it’s not ‘Mustachian’ to have kids before you’re FI -- that it is somehow a character flaw to have children before you have amassed enough to support them in the event of your untimely death?   Well, it’s the internet. 

ender

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In any way implying that it’s not ‘Mustachian’ to have kids before you’re FI -- that it is somehow a character flaw to have children before you have amassed enough to support them in the event of your untimely death?   Well, it’s the internet.

This is the part that amuses me the most about this whole thread.

The way you portray a message matters in terms of how it is received.

serpentstooth

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Calling a poster an idiot who doesn't subscribe to your point of view? That's what makes forums fun!

wasnt calling him an idiot - Idiocracy is a Movie - look it up

Plot summary from IMDB

Joe Bauers, an Army librarian, is judged to be absolutely average in every regard, has no relatives, has no future, so he's chosen to be one of the two test subjects in a top-secret hibernation program. He and hooker Rita were to awaken in one year, but things go wrong and they wake up instead in 2505. By this time, stupid people have outbred intelligent people; the world is (barely) run by morons--and Joe and Rita are the smartest people in America.
- Written by Anonymous

to say "children can't be planned" falls right in line with the plot of this movie. 

Also the human race may not exist now if early man didnt just breed, but we have reached a point of intelligence where we dont just breed like animals anymore - hence the race can be survived and prosper with well thought out and planned children having.  There is 0 thing as an accidental child you may not be planning to have one but you dont just wake up pregnant one morning without having executed an action previously.

My husband and I both have IQs that have tested at 2+ standard deviations above the mean. If you want to prevent Idiocracy, you want people like me having as many kids as possible. So actually, we're doing the human race a favor by having kids younger, before we're FI, so we can have more of them and make more people with our high IQ genes. You're welcome.
« Last Edit: May 06, 2016, 04:55:33 PM by serpentstooth »

jim555

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I know a family who had 4 children, no life insurance.  Father died at 43, lung cancer.  They lived by SS Widow benefits and barely scraped by.  Lesson learned, if you have kids you NEED life insurance.

Since I am now FIREd life insurance serves no purpose.

serpentstooth

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Calling a poster an idiot who doesn't subscribe to your point of view? That's what makes forums fun!

wasnt calling him an idiot - Idiocracy is a Movie - look it up

Plot summary from IMDB

Joe Bauers, an Army librarian, is judged to be absolutely average in every regard, has no relatives, has no future, so he's chosen to be one of the two test subjects in a top-secret hibernation program. He and hooker Rita were to awaken in one year, but things go wrong and they wake up instead in 2505. By this time, stupid people have outbred intelligent people; the world is (barely) run by morons--and Joe and Rita are the smartest people in America.
- Written by Anonymous

to say "children can't be planned" falls right in line with the plot of this movie. 

Also the human race may not exist now if early man didnt just breed, but we have reached a point of intelligence where we dont just breed like animals anymore - hence the race can be survived and prosper with well thought out and planned children having.  There is 0 thing as an accidental child you may not be planning to have one but you dont just wake up pregnant one morning without having executed an action previously.

My husband and I both have IQs that have tested at 2+ standard deviations above the mean. If you want to prevent Idiocracy, you want people like me having as many kids as possible. So actually, we're doing the human race a favor by having kids younger, before we're FI, so we can have more of them and make more people with our high IQ genes. You're welcome.

Also, depression and other mental illnesses afflict the clever more. Arguably, the smarter you are, the MORE you should bank on a psychological episode derailing you for some portion of your life.

http://www.medicaldaily.com/why-smarter-people-are-more-likely-be-mentally-ill-270039

This pattern holds disturbingly true in my mother's family. We were enrolled in a long term study on intelligence, because both my maternal grandparents are Mensa members and so every descendant of that couple, save their 1 year old great granddaughter, has been IQ tested. The lowest scoring of my grandmother's 4 children has a doctorate in Education and all the descendants score at least a standard deviation above the mean. I am not kidding. This is not an extended humblebrag on the awesomeness of my family. Along with the smarts, we've also got one paranoid schizophrenic who was unable to ever work, 2 cases of ADHD, one case of bipolar disorder, and the majority of us are diagnosed depressives, one severe enough to require hospitalization recently. Family reunions are AWESOME.

StockBeard

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I know a family who had 4 children, no life insurance.  Father died at 43, lung cancer.  They lived by SS Widow benefits and barely scraped by.  Lesson learned, if you have kids you NEED life insurance.
Anecdotes are not statistics.

I know a guy who made a killing investing all his money in one specific penny stock. I'm sure we all know at least one person who did great with a risky investment. Is anybody on this board advocating for risky investments? No, most of us on this board trust the average and statistically valid option.

The same goes for desertadapted's point: empathy, feelings, etc... are all great, but should be taken into account in the equation the same way people handle their risk aversion. Some of us calculate things coldly, others like to put feelings in the mix, fair enough, but I think blaming one guy for (admittedly, with lack of tact) trying to re-center the debate on cold numbers is an example of people fooling themselves, or, in this case, being fooled by the insurance companies.

We all want the best for our families. That's why we put our kids in expensive Ivy-league schools, that's why we buy expensive cars with additional security we don't need (see recent thread about families buying SUVs so their kids are protected in case of accident), and that's why we buy expensive life insurance. We all do that here, right, because that's what this site is known for?

boarder42's point, from the start, has been that in the OP's circumstances (halfway to FI) it probably is not a wise financial choice, and that pouring feelings in the mix is clouding their judgement. The amount of people adding anecdotes in this thread, of people they know who died and things ended up badly for the family, instead of looking for rational data, is telling. Those are sad examples, but they are probably not statistically valid.

boarder42

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I know someone who went to McDonald's got food poisoning from a burger and died. No one should ever go to McDonald's.  (Really you shouldn't it's awful but it's beside the point). But this is literally the pitch you are trying to sell. 

On the math front. There isn't a formula I can find for survivor benefits for SSA. I can build it off mine and the one other who reported his here but beyond that since there isn't a published formula like there is for SSA it's very hard to develop. I'm not really concerned about the maths from other countries that don't have this but it's really simple.

If you make 50% of the income and your spouse the other and you save more than 50%. As you should be here. If you or your spouse dies you don't need life insurance. SSA will cover both deaths.

Each situation is unique and you have to do the math. The OP likley has more than enough but you need real numbers to know what's mustachian in his situation. 

But the ultimate mustachian doesn't ever carry insurance on ones life unless it's free. You plan to not have it.

desertadapted

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Anecdotes are not statistics.

   Respectfully, no one has actually cited any statistics that I could see on either side of this discussion.  Nor did MMM in his oft-cited post.  Instead, most of the anti-insurance arguments rely on the truism that applies to all insurance: you are statistically unlikely to get your money’s worth.  Well, of course.  Insurance wouldn’t exist if it was a certainty that we would each obtain a massive return on investment.  For a $1 million term life policy, you end up paying less than pennies on the dollar for the policy.  The same is true for umbrella coverage.  In both cases, because the likelihood of the outcome is low.   LTC insurance costs much more because the likelihood of the event is more substantial.  Same with auto insurance and health insurance.      People tend to have umbrella coverage or term life (both very low cost) because although the risk is low, the cost of the subject event is significant.  I am broadly insured.   With each kind of insurance I am making a bet.  If you add them together (health, auto, term, etc.), I’ve been a net “winner” (e.g., have paid less in premiums than I have received in claims).  I wish I had not been.   If you had asked 20-something me about the likelihood that someone in my family would be diagnosed with an incurable and expensive-to-treat medical condition, I would have said the odds were low.  And I would have been wrong.   Had MMM made the same bet because insurance is a mug’s game (and but for the ACA, which makes discrimination based on pre-existing condition illegal), he would have no ‘Stache’ today, or it would be severely depleted.   

   If the answer for OP is “you were irrational to ever have insurance,” fine.  The natural extension of that advice is to get the minimum legal auto coverage, minimum legal health insurance, no liability coverage, etc.    I find that point of view dogmatic, but as before, your choice. Yes, you are statistically more likely to come out ahead over a lifetime.  But you’ll be screwed if it comes out snake eyes.  I again think that more prudent thing is to make sure you’re looking at your assets and financial needs and covering for them.  Closer to FI? Less coverage (at least for term life).   Lots of assets and a teen driver in the home?  Consider increasing your liability coverage.
 

StockBeard

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desertadapted: fair enough, and I think I agreee. I feel that's not been the point of many posts in this thread though, that were taking a very emotional approach and blaming the one person who tried to take it from a rational perspective

ender

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desertadapted: fair enough, and I think I agreee. I feel that's not been the point of many posts in this thread though, that were taking a very emotional approach and blaming the one person who tried to take it from a rational perspective

People are approaching it from a risk management perspective.

Insurance, by definition, is a risk management tool. No one who currently carries life insurance would disagree (I don't think?). Everyone has different levels of risk, hence disagreement here.




MrsPete

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We bought term life insurance when we were in our 20s and were preparing to have kids. 

Our rationale:  We were both working and were doing well financially; however, if one of us had suddenly died, the remaining spouse would've been in trouble financially.  Yes, that spouse's income would've continued (perhaps not immediately, especially if children were involved), but the remaining spouse's life (and the children's lives) would've been easier if that spouse had money to pay off the house and put away college money.  With those two big ticket items gone, the remaining spouse's salary would be enough to keep the house hold running -- even if paid help were needed for childcare, etc. 

Fortunately, we never had to test the validity of our plans, but we felt that the peace of mind provided by the insurance was worth the modest cost.

Though this wasn't the question, keep this in mind:  Financially the nightmare possibility isn't a spouse's death.  It's a spouse's disability.  Think it through:  The worst possibility is that one spouse would be ill/injured and would need expensive medical treatment and physical help ... PLUS that spouse's income would be lost ... PLUS that spouse would be unable to provide childcare and household work.  That'd leave the healthy spouse in a world of trouble!  While you're thinking about life insurance, check on your disability insurance too. 



VaCPA

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desertadapted: fair enough, and I think I agreee. I feel that's not been the point of many posts in this thread though, that were taking a very emotional approach and blaming the one person who tried to take it from a rational perspective

I don't know, didn't he compare his wife to a pair of shoes? I don't know if that poster is the epitome of rational...

serpentstooth

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desertadapted: fair enough, and I think I agreee. I feel that's not been the point of many posts in this thread though, that were taking a very emotional approach and blaming the one person who tried to take it from a rational perspective

I don't know, didn't he compare his wife to a pair of shoes? I don't know if that poster is the epitome of rational...

He also suggested anyone who had children prior to full financial independence was an idiot!

Vagabond76

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I quietly read all the updates to this post over the last couple of weeks and came to two conclusions:

1. Life insurance is a very personal decision (okay I knew that already)

2. It will be very difficult for me to take anything Border42 types seriously.

boarder42

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desertadapted: fair enough, and I think I agreee. I feel that's not been the point of many posts in this thread though, that were taking a very emotional approach and blaming the one person who tried to take it from a rational perspective

I don't know, didn't he compare his wife to a pair of shoes? I don't know if that poster is the epitome of rational...

He also suggested anyone who had children prior to full financial independence was an idiot!

Incorrect. Read the post

boarder42

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desertadapted: fair enough, and I think I agreee. I feel that's not been the point of many posts in this thread though, that were taking a very emotional approach and blaming the one person who tried to take it from a rational perspective

I don't know, didn't he compare his wife to a pair of shoes? I don't know if that poster is the epitome of rational...

I didn't compare my wife to a pair of shoes I was simply trying to point out the ridiculous take that one will completely shutdown at the loss of a fellow human.

jrhampt

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We each get life insurance through our employers at no extra cost to us.  I don't think I would bother purchasing it separately even if we had no work benefit, because we have two incomes, no children or other dependents, a paid off house, no other debt, and a significant amount of assets. 

MrsDinero

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I fall into the "with kids" camp.

My SO is my beneficiary on all my accounts (investment and banking) so he will get the bulk of my financials on my demise. 

I do have a small life insurance policy of $50k that I have had for years.  I considered letting it lapse because I don't need it to pay of any debt anymore.  Instead I've decided to use this account to leave money specifically to be split among my children. 

csprof

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boarder42's point, from the start, has been that in the OP's circumstances (halfway to FI) it probably is not a wise financial choice, and that pouring feelings in the mix is clouding their judgement. The amount of people adding anecdotes in this thread, of people they know who died and things ended up badly for the family, instead of looking for rational data, is telling. Those are sad examples, but they are probably not statistically valid.

Let's not conflate the negative connotation you're attaching to "feelings" with the very real (and somewhat hard to calculate for anybody) probability of suffering a short-to-medium-term income-impairing mental/emotional impairment subsequent to the death of a spouse.

Viewed differently, a portion of the discussion in this thread involves using insurance as a hedge against this low-probability but high-cost event.

It's very hard to accurately predict how one will respond to such an event.  For example:

  http://www.ncbi.nlm.nih.gov/pubmed/1897615

Quote
Eighty-four (24%) of 350 widows and widowers met criteria for depressive episodes at 2 months, 72 (23%) of 308 did so at 7 months, and 46 (16%) of 286 did so at 13 months. At each time period, the prevalence was substantially higher than the 4% rate of depressive episodes observed in a comparison group of 126 subjects whose spouses were still living. Widows and widowers most likely to meet criteria for depressive episodes 13 months after the bereavement were younger, had past histories of major depression, were still grieving 2 months after the loss, and met DSM-III-R criteria for depressive episodes 2 and/or 7 months after the death.

CONCLUSIONS:
Depressive episodes are common after the death of a spouse. Clinicians should maintain a high index of suspicion for the possibility of depression, particularly in young widows and widowers who have a past history of depression or who experience a full depressive syndrome soon after the loss.

(And more - see links in https://www.psychologytoday.com/blog/media-spotlight/201503/grief-loneliness-and-losing-spouse - but be warned that much of the research focuses on more elderly populations.)

Twenty four percent. (!!)  I think there's a bit of self-deception involved to think that you're 100% not going to be part of that 24%.  I'd argue that the fraction is so high that it's probably best to bet that there's at least a 5% chance of suffering income-impairing depression following the death of a spouse, even if you're married to a pair of shoes.

The death of a spouse is one of those very hard things to predict.  The insurance companies have pretty good risk models for this, so of course, they're "winning" on average, but this a use of insurance in the case that one cannot self-insure.  (Self-insuring against this would mean one was already FIREd, in which case, of course life insurance would be silly.)  That's exactly the purpose of insurance.
« Last Edit: May 09, 2016, 09:27:43 PM by csprof »

Le Barbu

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Life Insurance is useful in some rare circumstances. It IS mustachian to use it after calculate the cost/benefit and take decision. As csprof said, it is an edge against a low-probability but high-cost event.

As an example, a couple with 1M$ NW may not need life insurance from our POV. On the other end, they can afford a 500k life insurance for 500$/year because it's pocket change for them. One of the spouse die and there is taxes to pay. Lets say most of their NW is tied in real estate (or a small business, or wathever) wich mean you have to borrow against to pay the taxes or sell (at profit or loss?) wich take time, carry fees, and afterward may not be the best decision. Life insurance money will give the liquidity, time and at the end, choices. To me, this is kind of mustachian.

And what if a couple with children, 1 low income parent (spend a lot of time taking care of the children, house, meals, etc.) and 1 high income parent (work with a shitty schedual, long hours, travel a lot, etc.) They manage to do pretty well on the mustachian path, 50% saving rate, etc. One of them die, this change the "pattern" and you cannot think this will not hurt in any ways (both personaly and financialy). Life insurance may prevent from things like "find another spouse for money or baby sitting purposes" at least in the short term.

In our plan, we will spend about 10k on life insurances over our working career and bring home 2.5M wich mean life insurance cost less than 0.5% of our income to edge the death risk.

To me, it fits in the same category than keeping 500$ in cash at home and 5k in the checking account when your investing portfolio is 1M. I would say it is a bad choice for someone with a 5k balance on CC @ 18.9% and a 0$ NW. Same money, different decision!

Allie

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We have life insurance for my husband and myself.  He works outside the home and has a large policy.  I don't work and have a small policy.  We have policies that will allow us to continue on our chosen paths without missing a beat if either one of us dies. 

If I die, he has enough to pay expenses related to my death, take a break from his work if he wants to grieve and support the kids, then hire someone to do everything I do like take care of the kids, clean, cook meals, and such so he can continue to work because right now his job is high income/high stress and his intention is to work as long as he can, because he likes it. 

I'd like to think that after I die, he would not be able to engage in high focus work right away...maybe if his job was pushing a button on the cog machine in the cog factory, I could assume he could jump right back in, but would you want someone who just lost a spouse responsible for your life or your children?  He'd be managing his emotions, having to support kids who had lost their mother, dealing with the death legal stuff (which is a huge burden), and working?  Even if he wasn't clincially depressed, it would be intense.

If he dies, I can retire the mortgage and have a big enough stash to pay for the kids and anything that may come up (like expensive orthodontia) without having to work. 

In a few years, when we are comfortably FI, we may drop the policies. 

Could we save a couple hundred bucks a year and plan for me to work outside of the home if he dies or for him to work longer to pay for daycare?  Of course.  But, everyone's circumstances are unique.  We have two little kids, a family history of health issues that could reasonably lead to early death, no access to social security, and a love of slightly dangerous outdoors activities. 

It doesn't make any sense to make blanket statements about what is or is not a reasonable safety net for anyone who doesn't share your exact circumstances.