Author Topic: Cancel life insurance or switch to a cheaper policy?  (Read 3484 times)

Thegoblinchief

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Cancel life insurance or switch to a cheaper policy?
« on: May 15, 2014, 10:26:14 AM »
Digging deeper down into our finances to consider dropping to a single-income. Currently I pull in about $1,000 a month on weekends, but as our finances get healthier, we're questioning whether the lost time is worth having the extra $

I'll do a full case-study sometime soon, but I think this issue is best phrased as a separate question.

DW currently has about 18 years left on a 250,000 term policy. Considering changing carriers, but I'm keeping this policy no matter what. It would be very difficult for me to replace her income if she were to die.

I got my life insurance at the same time for $40/month. Because I'm considerably healthier now I can get coverage for a 15 year 250K for $24 a month (USAA is where I checked, it might be lower as I shop around). Should I get the cheaper coverage or cancel the policy altogether?

Pro cancellation: No income to replace if I die, saves us a (small) amount per month. This is roughly $6,000 compounded over that period. Not a huge amount, but certainly not insignificant either.

Con cancellation: Reading through some older threads, people made a very good point that it would be difficult emotionally for my wife to continue earning income at the same level, deal with suddenly becoming a single parent, etc. Her income can cover all expenses, particularly since (correct me if wrong) my student loan obligations don't carry over.

Thoughts?

Milspecstache

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #1 on: May 15, 2014, 10:33:17 AM »
Based on your age and stated health I think you can do better.  You are eligible for USAA, how about NMAA?
https://www.navymutual.org/

I got a $750k policy from them in 2007 that included 100k on my wife and 10k on each child as soon as they are born, all for $40 a month and some years I get a partial refund.

brewer12345

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #2 on: May 15, 2014, 10:36:54 AM »
Considering how inexpensive term is, I tend to err on the side of having too much rather than too little.  That said, pencil out your budget and net worth assuming you kick the bucket.  I assume some additional money would be required for childcare, for example.  It would also be worth looking into what SS survivor's benefits would be for your DW if you get hit by a beer truck.

La Bibliotecaria Feroz

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #3 on: May 15, 2014, 11:25:14 AM »
You provide a lot of value to your family. Especially with your kids being homeschooled, your wife would almost certainly need to take a leave of absence to get them settled if, God forbid, you died. And there would almost certainly be expenses, even for the most Mustachian send-off. Keep at least a small policy until you get closer to financial independence.

caseyzee

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #4 on: May 15, 2014, 11:33:00 AM »
Rather than a 15 or 20 year, can you price out a 10 year term?

With small kids, your wife would most likely need to pay for daycare or before/after school care if something were to happen to you.  That cost would go away as the kids hit their teens. 

And your savings would be that much larger in 10 years, of course.

Thegoblinchief

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #5 on: May 15, 2014, 11:46:24 AM »
Good points all. I'll start doing some shopping, I guess :)

nereo

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #6 on: May 15, 2014, 12:01:53 PM »
I second looking into the 10 year term.  By then your goblins should be mostly grown (would that make them trolls?) and presumably your 'stache will be much larger.
My strategy is to stop paying for life insurance the day I am certain that we'd have enough to carry on if i should die or become decapacitated.  Once I reach that point I figure the monthly policy payments are better of going directly into my own investments.

Thegoblinchief

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #7 on: May 15, 2014, 12:04:52 PM »
I second looking into the 10 year term.  By then your goblins should be mostly grown (would that make them trolls?) and presumably your 'stache will be much larger.
My strategy is to stop paying for life insurance the day I am certain that we'd have enough to carry on if i should die or become decapacitated.  Once I reach that point I figure the monthly policy payments are better of going directly into my own investments.

10 years would put my oldest at 18, youngest at 14. We'd be debt-free and roughly 50% FI.

15 years would have all of the kids be adults and is our (loose) target for full-FI.

Cassie

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #8 on: May 15, 2014, 03:08:49 PM »
I would lock in 20 years at a low price.  If you do 10 or 15 and want to do more the price you would pay will be a lot higher because it is based on your age at the time you buy it & your health which could change.  Also I am sure based on our past experiences that you can get it cheaper so shop around.

catccc

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Re: Cancel life insurance or switch to a cheaper policy?
« Reply #9 on: May 15, 2014, 04:36:55 PM »
I would definitely carry some sort of life insurance if I were in your shoes.  My husband and I got 30 year policies for $500K (me) and $400K (him.)  30 yr seems like a long time, but we purchased it when our first was an infant, and if it ever pays out, we wanted it to basically cover housing and college for 2 kids.  Our youngest will be around 27 when the policies expire.  IDK that it will do that, but $400-$500K would get us awfully close to FI at this point, and we are probably close to 50% FI.  It's about what you are personally comfortable with, I bet there are people who would see us as both under and over insured.  FWIW, we were maybe 30 when we bought the policies, and they are $348/yr for DH's $400K coverage and $319/yr for my $500K coverage.  In 30 years, I hope we just wasted a bunch of money on this peace of mind, but until then, we will carry on and work towards FI.