Author Topic: Is it time to cancel our (term) life insurance?  (Read 3709 times)

elaine amj

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Is it time to cancel our (term) life insurance?
« on: January 05, 2016, 12:35:52 PM »
Many years ago when I was a SAHM with two small babies, we purchased a $500k life insurance policy for DH. We decided life insurance was not necessary for me - DH felt confident he could provide for the family incl. daycare, etc.

Fast forward to now and DH is 45, our house is almost paid off (August 2016!), and we are FI - considering FIRE for me in the next 1-2 years with DH following in 4 years or so. Kids are 13 and 14 so will be launched soon.

Is it time to cancel the insurance? It costs us CDN $37/mo or $444/yr - would be nice to put this money in savings instead.

La Bibliotecaria Feroz

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Re: Is it time to cancel our (term) life insurance?
« Reply #1 on: January 05, 2016, 12:43:23 PM »
If you are financially independent, then you don't need it. Seems like the worst case scenario is that you would work a couple more years.

It's possible, though, that it's not all or nothing. When we took out a policy for Mr. FP, we were told that we could reduce the amount once during the term of the policy.

Especially if you have pension death benefits. When we got our wills done, I was surprised to realize how much $$ the boys would get from Mr. FP's pension if he died while he was working.

CheapskateWife

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Re: Is it time to cancel our (term) life insurance?
« Reply #2 on: January 05, 2016, 12:48:35 PM »
For my tastes, the kids at 13 and 14 are still a little young to be running uninsured; but we aren't FI yet.  Close, but not there.  Our term policies will be expiring as the youngest reaches the age of 20 and that feels comfortable for us.

Maybe you run the math and see if DH died tomorrow without insurance, could you survive without modifying your plan?  Is there some sort of Canadian SSI death benefit that would help with the kids until they reach the age of majority?

elaine amj

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Re: Is it time to cancel our (term) life insurance?
« Reply #3 on: January 05, 2016, 03:05:24 PM »
For my tastes, the kids at 13 and 14 are still a little young to be running uninsured; but we aren't FI yet.  Close, but not there.  Our term policies will be expiring as the youngest reaches the age of 20 and that feels comfortable for us.

Maybe you run the math and see if DH died tomorrow without insurance, could you survive without modifying your plan?  Is there some sort of Canadian SSI death benefit that would help with the kids until they reach the age of majority?

I've run the math - and we are FI (as long as we live frugally - which is what we're working towards anyway). We do have lots of wiggle room in our budget - since almost 15% of our budget is tagged for vacations. If something happens to DH tomorrow, our expenses are likely to drop slightly (one less person to feed is a morbid way of looking at it). He does have a small life insurance policy with his work (as do I). I will have to check into death benefits. He does have a very good pension plan through work so I imagine there is something there. I can support the family on my income if necessary, although I imagine if something did happen to him, it is highly unlikely I would be willing to work - at least for a little while.

Prairie Stash

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Re: Is it time to cancel our (term) life insurance?
« Reply #4 on: January 05, 2016, 03:10:00 PM »
I presume you have accumulated >$500K since you got the term deposit. If you only needed $500K then why do you need $500K+savings now?

Either you under insured then or you're over insured now...

CheapskateWife

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Re: Is it time to cancel our (term) life insurance?
« Reply #5 on: January 05, 2016, 03:12:54 PM »
For my tastes, the kids at 13 and 14 are still a little young to be running uninsured; but we aren't FI yet.  Close, but not there.  Our term policies will be expiring as the youngest reaches the age of 20 and that feels comfortable for us.

Maybe you run the math and see if DH died tomorrow without insurance, could you survive without modifying your plan?  Is there some sort of Canadian SSI death benefit that would help with the kids until they reach the age of majority?

I've run the math - and we are FI (as long as we live frugally - which is what we're working towards anyway). We do have lots of wiggle room in our budget - since almost 15% of our budget is tagged for vacations. If something happens to DH tomorrow, our expenses are likely to drop slightly (one less person to feed is a morbid way of looking at it). He does have a small life insurance policy with his work (as do I). I will have to check into death benefits. He does have a very good pension plan through work so I imagine there is something there. I can support the family on my income if necessary, although I imagine if something did happen to him, it is highly unlikely I would be willing to work - at least for a little while.

I just recently found out that if I pass away while employed, my spouse will begin receiving my pension benefit (to a lesser degree) despite the fact that I am still 15 years away from being able to claim it myself.  He may have something similar.  Between this and any social security net, you may be set to kill the term life policy.

elaine amj

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Re: Is it time to cancel our (term) life insurance?
« Reply #6 on: January 05, 2016, 04:05:47 PM »
The $500k was supposed to pay off the house ($160k) and provide me some years of living expenses (at that time $30k a year x 10 yrs = $300k).

The house is now almost paid off and our savings (not including the house) should leave me ok. Maybe not for the rest of my life (if I don't have his pension - not sure as I have not looked into that scenario) - but regardless, I cant see myself never again being independent/resourceful/capable enough to bring in some income.

I have always believed in buying only as much insurance as I need. I just started to wonder how much we need at this stage of our lives.
« Last Edit: January 05, 2016, 09:07:04 PM by elaine amj »

homestead neohio

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Re: Is it time to cancel our (term) life insurance?
« Reply #7 on: January 05, 2016, 06:44:00 PM »
If something happens to DH tomorrow, our expenses are likely to drop slightly

This.  You are over-insured if you are FI now with a 4 person household and 15% travel in your current budget.  A 3 person household is cheaper to run.  I'd cancel it.  You are self-insured now!

FrugalFan

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Re: Is it time to cancel our (term) life insurance?
« Reply #8 on: January 06, 2016, 08:09:06 AM »
My situation is very different because my kids are very young (1 and 3) and our expense are high right now due to full time daycare. Without that extra cost, we would be closer to FI. But our expenses would likely go up if one of us died and we didn't have insurance because the remaining parent would need more help with caring for the kids and house while working full time. With our current insurance, the remaining parent would instead be immediately FI and could choose stay home with the kids instead. With the numbers you presented I think you can consider yourself self insured. But in your shoes, I would keep the policy an extra 3-4 years until the kids are out of the house, since the cost is minimal and you don't "need" the money since you are already FI, but it could provide extra financial security for the future.

tjalexander

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Re: Is it time to cancel our (term) life insurance?
« Reply #9 on: January 06, 2016, 08:18:07 AM »
If something happens to DH tomorrow, our expenses are likely to drop slightly

This.  You are over-insured if you are FI now with a 4 person household and 15% travel in your current budget.  A 3 person household is cheaper to run.  I'd cancel it.  You are self-insured now!

+1

elaine amj

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Re: Is it time to cancel our (term) life insurance?
« Reply #10 on: January 07, 2016, 11:08:28 AM »
Thanks everyone! We're tracking down our insurance documents (sad to say we haven't looked at it in a long time!) and will discuss our options with our agent. It's a teeny bit hard to let it go as my mother was a very successful life insurance agent and my father is also an insurance executive. It's kind of exciting and empowering to feel like we have reached a stage where we will be fine financially even if the worst were to happen. Still, we are considering hanging on to it for a little bit longer. Another MMM'er mentioned in another thread that her premiums were going up at 46. DH is 45 now, so I have some concerns here.

acroy

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Re: Is it time to cancel our (term) life insurance?
« Reply #11 on: January 07, 2016, 11:29:22 AM »
Cancel!
I bought $1M 10yr policy on myself at age 28 with 1 kid, stay at home wife, maybe 100k assets. $225/yr for the policy.

Now: age 38, 6 kids, DW still SAHM. About 650k net worth, work's freebie life insurance is 3x salary, so if I kick the bucket today, DW will be at about $1M. Plus social security, which is very generous.

No need to insure; you're good.