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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: K-ice on April 28, 2016, 04:11:08 PM

Title: Life insurance: What is your Mustacian logic for having or not having it?
Post by: K-ice on April 28, 2016, 04:11:08 PM
I know a FIRE mustacian doesn't need to worry about life insurance.

But what if you are only half way to FIRE?

We have a default mortgage life and critical illness insurance.

But it is costing us way too much, $300+ per month.
I am aware that this is a bank up-sell.   "Would you like fries with that?"
It is not mandatory, and we can cancel it but it was convenient at the time (face-punch).

This will pay out our mortgage ~$300K if either of us die or get critically ill.

Separately we could get 20y term insurance for $300K

$35 month hers
$63 month his

So for about $100 per month our L'il-ice would get a total $600K if we both died.

That money could then pay off the mortgage and give L'il-ice's guardians plenty. If just one of us kicks it, the $300K would probably be enough for the other to FIRE soon.

I am looking into the critical illness component separately, but it is not as easy to get online quotes. It looks like it would only cover a max of $50K for another $70 bucks a month or so.

Then there is accident insurance, which I actually think is more likely to happen....

There are also whole life products that make my head spin.

I am sure many of you have done the calcs and spread sheets.

What do you do and why?

Has anyone ever had to collect on a policy? How did that go?

I am always skeptical about insurance paying out.

"Oh we are sorry, those hiccups were a pre-existing sign of heart issues so you are not covered."



 


Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: seattlecyclone on April 28, 2016, 04:31:03 PM
You should have enough life insurance so that your dependents would be "fine" in the event you died, for some definition of "fine." There are a few different goals you might want to go for.

At the high end, you might want to have enough insurance so that if you passed away, your spouse would be insta-FIRE. The reason for this would of course be that your spouse might have additional child care expenses if they keep working, and in any case would not be able to maintain nearly the savings rate that you had as a two-earning couple.

At the low end, you might want to have enough insurance for a year or two worth of living expenses to give your spouse some time to adjust to being a single parent and adjust budgets, housing, etc. as needed to make that situation sustainable.

I know your profile says you're in Canada. Here in the US our federal social security has a provision to give some pretty decent monthly payments to children who lose a parent, and also to surviving spouses who take care of the children instead of working. If Canada has a similar program, consider this amount when deciding how much extra insurance to purchase for yourself.

Whatever you decide, term life is the way to go.

Disability insurance is also a very good idea, perhaps even moreso than life insurance. Your loved ones might be able to figure out how to live without your income after you die more easily than you might be able to pay your living expenses while dealing with a long-term disability that leaves you unable to work, and perhaps even makes your living expenses higher if you need special equipment and/or assistance to cope with your disability.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: VaCPA on April 28, 2016, 04:48:18 PM
I have a 500k term policy so my wife could pay off the house and have some leftover. She'd still have to work but could live comfortably with the kids in our paid off house vs being very tight on money and maybe having to downsize. She has some insurance through work similar logic. Essentially our policies are income replacement and although we'd survive without them it's worth the minimal cost to be protected if one of us kicked it.

$300/month is a lot though. Maybe look into cancelling that and keeping the term.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Eric on April 28, 2016, 04:55:06 PM
With no kids, no house, and dual incomes, it would just be an unneccesary expense.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on April 28, 2016, 05:35:10 PM
People on here hate it when I explain how good our whole life policies are.  We own two, one on me and one on her:

$250k initial death benefit, $626.20/mo for 60 months.  It will be paid off in October this year.
The death benefit grows every month.
The cash value credits at 6.5% to 7.5%, with a minimum of 4% growth.
The cumulative administrative expenses (excluding the cost of insurance) over those five years is .29%, or about the cost of an index fund.
The expenses are fixed at $110/year, but the cash value will continue to rise, meaning the already low expenses will approach zero.
The other expense is the cost of the insurance, which is about $114/year.
The cash value builds tax-deferred, but I can take out what I paid into it tax-free.
All proceeds are tax free if used for long term care or if the beneficiaries take it when I croak.

In sum the benefits are:  low cost (and getting lower), tax-deferred growth, guaranteed growth, three options for tax-free withdrawals.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: big_owl on April 28, 2016, 06:10:54 PM
We have somewhere around a $400k term for each of us.  The obvious reason is that a big hunk of cash would go a long way in helping out should the other die.  If my wife dies the last thing I want to worry about is whether I have enough money allotted to pay the bills.  I doubt I'd be able to go back to work for several weeks or more and who knows what would happen when I did.  It's just one less thing to have to stress out about. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 28, 2016, 07:04:24 PM
We don't have it and likely never will. Reasoning :

1. Currently no kids
2. By the time we have kids we will have over 750k net worth.

End of reasoning. 

IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on April 28, 2016, 07:31:55 PM
IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.

Spoken like a person with no kids. When is one ever "ready" to have kids?  If that was the correct standard for having kids the human race would have died out several millennia ago.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: csprof on April 28, 2016, 10:02:00 PM
IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.

Spoken like a person with no kids. When is one ever "ready" to have kids?  If that was the correct standard for having kids the human race would have died out several millennia ago.

To the OP:  You're probably getting completely screwed on that mortgage payoff life insurance.

I just checked mine - I'm paying something like $50/month for my supplemental life insurance through work, for about $680k.  Now, work covers the first chunk of that automatically, but still - $300/month seems insane unless you're older than I assume or have serious health issues.  My bet is that it's not based on your age or health, because they've priced it at such an insane profit margin that they offer it globally and laugh all the way to the bank.

I threw a quick number in to an online life insurance quote thing, and it suggested about $90 / month for $500k of 30 year term life, which is a little more than you're getting, especially since the value of yours goes down over time.

Run away as fast as you can.

Re the "why do you have it" -- my wife and I each have a similar policy covering our own death.  Our view of it is that it's enough to let the surviving spouse continue to live without *any* life changes for at least 5 years while *increasing* spending to hire additional care and help manage full-time intensive work while being a single parent.  The 5 years is enough of a ramp to give time to recover and then make the needed life changes to adjust to reduced income without having any crazy time pressure to, e.g., move into a smaller house.  It also ensures that all of her expenses up through and including college are covered if we both die.

$100/month between the two of us is cheap insurance.  We chose this route, in contrast to the poster who claimed that life insurance is for those who have kids "too early", because we're financial late-starters.  We both have Ph.Ds: We make quite a bit of money now, but gave up our first ~6 years of post-college earnings to do so.  We'll cancel the life insurance in another 5-10 years.

Before we had a child, we had no life insurance beyond the minimum our work provides.  We both work and could trivially support ourselves.  The insurance is all about single or no parenting.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 04:19:55 AM
IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.

Spoken like a person with no kids. When is one ever "ready" to have kids?  If that was the correct standard for having kids the human race would have died out several millennia ago.

News flash. It's completely controllable. It's not just like whoops I didn't realize doing that would make a baby.  Also see MMM FIRE before having a kid is ready to have a kid.  Not saying we will be fire but 750k nw is far from needing any kind of life insurance. Idiocracy is happening
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: big_owl on April 29, 2016, 04:53:07 AM
We don't have it and likely never will. Reasoning :

1. Currently no kids
2. By the time we have kids we will have over 750k net worth.

End of reasoning. 

IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.


LOL, so you've discovered the cheat code "your spouse doesn't die until all your plans are in order and you have enough money saved up that you don't need it".  What's the secret?
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Fishindude on April 29, 2016, 05:04:59 AM
I've never been a fan of life insurance.  Keep enough through work health insurance to get myself buried, but that's it.
Our net worth is our life insurance.

Wouldn't be a bad idea for a young family with young children, if it could be bought pretty cheap.  Once the kids are out, not much need.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: VaCPA on April 29, 2016, 05:06:31 AM
Calling a poster an idiot who doesn't subscribe to your point of view? That's what makes forums fun!
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Paul der Krake on April 29, 2016, 05:27:52 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Drifterrider on April 29, 2016, 05:29:47 AM
I do not carry life insurance (and never have) because no one depends on me for financial support.  It isn't life insurance, it is death insurance.  You pay the premium and someone else gets the money. 

IF someone else depends on you financially now, you might want to have a policy.  IF you depend on someone else for something, they might need a policy.

Despite all the TV commercials, it is not my responsibility to give money to those who survive me.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 05:31:33 AM
We don't have it and likely never will. Reasoning :

1. Currently no kids
2. By the time we have kids we will have over 750k net worth.

End of reasoning. 

IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.


LOL, so you've discovered the cheat code "your spouse doesn't die until all your plans are in order and you have enough money saved up that you don't need it".  What's the secret?

what do you mean cheat code you dont trust your spouse to be able to take care of themselves should you die.  wow lotta faith you have in your spouse there.  there is an entire MMM Post on life insurance and most of his opinions align closely with mine. 

Direct quote from his insurance post

My wife and I have never carried life insurance on ourselves, and we consider it a compliment to each other: “I believe you would do Just Fine if I wasn’t around, because you’re a capable and independent person”.

http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 05:37:21 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: lakemom on April 29, 2016, 05:47:12 AM
I do not carry life insurance (and never have) because no one depends on me for financial support.  It isn't life insurance, it is death insurance.  You pay the premium and someone else gets the money. 

IF someone else depends on you financially now, you might want to have a policy.  IF you depend on someone else for something, they might need a policy.



This, we have a 20 year level premium term policies on both of us purchased (raised) when our youngest (of 6) was born.  We have 1million on him for $55 per month and 500k on me for $65 and mine has the child rider on it (10k to cover burial expenses for death of a child).  Additionally he has military insurance (cheap 10 buck a month or maybe 20) at 450k.  Our reasoning was that was just past our low point financially (lost everything in a failed business venture) and I'd always been basically a sahm (I run our small business that nets 20k/yr) and the amount would pay off the house, pay off the small business (putting more cash flow into the equation), and put all the kids through college leaving some left over for me to continue to supplement my income as needed.

 My insurance is to cover all the things he'd need to pay someone for (or take time off work for) that I take care of on a day to day/week to week basis.  We are in a much better place now cash flow wise but the insurance is cheap and we still have 2 to get through college and a rental house with a mortgage and the business still has a mortgage on it.  So, we keep the insurance in place.  In 11 years when it expires we'll probably let it lapse or get much smaller policies.  Will depend on our cash position at that time.

Meant to add, that the policy through the bank is the WORST since if one of you passes then the bank is paid off and the one left gets nothing.  Even with a 300k term policy, the survivor will get the money then can pay off the house, sell the house and downsize, invest the money and keep making mortgage payments, or go blow it all in Vegas and lose the house anyway (but I doubt that scenario from anyone who hangs out a MMM forums).
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on April 29, 2016, 05:52:36 AM
With no kids, no house, and dual incomes, it would just be an unneccesary expense.

Eh, this is not necessarily true.

My wife and I both took out 20 year term policies (for fairly cheap) because we plan on having kids in the near future. For us, the risk of becoming uninsurable during that time period was not worth it, particularly given how cheap the policies are. We expect that by the time those expire we're going to have plenty of money in a stash and not need anymore insurance at that time or just buy new policies, since we'll still be in our 40s.

Now if we were never planning on having kids and not planning on a stay at home parent then? Yeah, it'd definitely be a waste entirely.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Freedomin5 on April 29, 2016, 06:38:09 AM
I've had to help my mom collect on several policies after my dad died. It's pretty straightforward and as long as you have the death certificate, the insurance company will pay out. Most of it only requires a phone call to the claims department, and they'll walk you through the process really nicely, since they understand that you are grieving. Actually the accidental death payout attached to the car insurance paid out the quickest. We used it to pay the credit cards on which my mom charged the funeral home expenses, purchasing the burial plot, the coffin, etc. It also covered flights for siblings to return immediately for the funeral, and additional costs of hosting family members (extra groceries, etc.) from out of town.

We're only in our 30s but both my husband and I have small whole life policies (around 300k) to cover funeral expenses with some left over to pay off any taxes and settle the estate. We purchased it when we were in our 20s because the premiums sky rocket as you get older. When you calculate total premium paid, it's actually lower if you buy when you're younger.

Then, if you have kids, buy term to cover the time when you have young kids in the house, enough so your spouse has the option of not working while caring for the children. Obviously, if you have no kids and no dependents, you don't need the term. Another thing to consider are people who might become your dependents if your parents pass away, such as a mentally disabled sibling who is currently supported by parents but whom your parents expect you to support should they pass away.

Critical illness insurance is also a good one to have for the duration of your working years, especially if you're the primary breadwinner. I know my parents' business suffered when my dad got cancer, and they really could have used the insurance money to pay their workers instead of drawing from their own stash to stem the losses.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Guava on April 29, 2016, 06:38:55 AM
I bought a 30 year term policy when I bought my house in my early twenties. I wasn't sure yet when I was going to be having kids but I owed my parents a decent amount of money and wanted to make sure if something happened to me before I paid them back, they would be set. I did a 30 year policy so it would cover me until my (likely) kids were around 18. Still no kids but now my spouse would not be able to cover the bills on just his paycheck so the life insurance would provide enough to pay off the house and set him up with a good life. I pay $17 a month for a $250k policy and since I got the policy I have become uninsurable. I may not die in the next 20 some years but if I do, my spouse has a great safety net (medical bills are expensive and I expect them to make a dent in our reserves).
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: GuitarStv on April 29, 2016, 06:52:08 AM
I have some life insurance as a benefit through work.  I have none outside of work.  By the time that I stop my employment there should be enough money saved that life insurance isn't necessary at all.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: VaCPA on April 29, 2016, 06:57:32 AM
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.

Literally zero people in this thread so far have said kids can't be planned(although sometimes they do come unexpectedly). So not sure where you made that leap.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: DebtFreeBy25 on April 29, 2016, 07:54:01 AM
Neither my husband nor I have ever had a life insurance policy outside of work, and we would never purchase one. Insurance is meant to cover major "what if" expenses that the insured couldn't cover on their own. It's a gamble that almost always benefits the insurance company.

We don't have and will never have kids. Our house is paid off, and we live completely debt-free. We both have significant emergency funds. Neither of us has any interest in participating in the traditional funeral industry (cremation or donation, please). In these circumstances, life insurance is completely unnecessary.

Regarding the family planning controversy, I also believe that people should consider the financial consequences before having children and that it is possible for smart investors to be well prepared for any sort of emergency at an age when it's still realistic to have biological children. 

Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 08:37:06 AM
IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.

Spoken like a person with no kids. When is one ever "ready" to have kids?  If that was the correct standard for having kids the human race would have died out several millennia ago.

see this quote  "ready" to have kids is planning to have kids.  in my statement "ready" to have kids means have the financial means to support them.  and since OP was asking for OPINONS on life insurance and children is practically the only reason you should have it, it is My opinion one is not READY to have kids until one is financially able to support them without life insurance. which inherently takes financial PLANNING, which would be planning for children.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: FLBiker on April 29, 2016, 08:44:01 AM
Wife and I both have ~$200K policies for ~$20 per month through work.  We've got a 1 year old, and wife is currently a SAHM (unpaid leave of absence for the next year or so).  Our net worth is ~$450K, ~1/3 way to FIRE.  Once daughter is in school (and thus wouldn't require full-time childcare) we'll probably stop doing life insurance.  We might stop doing wife's sooner than that, because I'm comfortable assuming that risk as I make more money (75K vs 40K).
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: big_owl on April 29, 2016, 09:09:02 AM
We don't have it and likely never will. Reasoning :

1. Currently no kids
2. By the time we have kids we will have over 750k net worth.

End of reasoning. 

IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.


LOL, so you've discovered the cheat code "your spouse doesn't die until all your plans are in order and you have enough money saved up that you don't need it".  What's the secret?

what do you mean cheat code you dont trust your spouse to be able to take care of themselves should you die.  wow lotta faith you have in your spouse there.  there is an entire MMM Post on life insurance and most of his opinions align closely with mine. 

Direct quote from his insurance post

My wife and I have never carried life insurance on ourselves, and we consider it a compliment to each other: “I believe you would do Just Fine if I wasn’t around, because you’re a capable and independent person”.

http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

One thing for certain is that neither you nor your wife has absolutely any idea how either of you would actually cope if just today one of you didn't come home from work ever again.  You can delude yourself into thinking that you'd soldier on successfully or that your wife's inner stoic would be released and she would move on and be successful, but unless you've actually been there and lost a spouse or child then you haven't a clue what will actually happen to you.  You could just as easily fall into a spiral of depression and lose all means of income.

Odds are in your favor, you'll probably continue to see each other each evening after work, but you never know if and you never know when.  Hopefully never but it could be tomorrow or next week.  That's what insurance is for.  You're certainly free not to purchase it, and you'll probably be ok.  But don't pretend you have some superior plan when the basis of your financial security is anchored around nothing bad actually happening until you have 750k and are ready to have children.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: slappy on April 29, 2016, 09:14:38 AM
We don't have it and likely never will. Reasoning :

1. Currently no kids
2. By the time we have kids we will have over 750k net worth.

End of reasoning. 

IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.


LOL, so you've discovered the cheat code "your spouse doesn't die until all your plans are in order and you have enough money saved up that you don't need it".  What's the secret?

what do you mean cheat code you dont trust your spouse to be able to take care of themselves should you die.  wow lotta faith you have in your spouse there.  there is an entire MMM Post on life insurance and most of his opinions align closely with mine. 

Direct quote from his insurance post

My wife and I have never carried life insurance on ourselves, and we consider it a compliment to each other: “I believe you would do Just Fine if I wasn’t around, because you’re a capable and independent person”.

http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

This is actually exactly why I have so much insurance on myself. My husband is a SAHD and I handle all of the finances. I don't want him to have any additional stress as it relates to finances if I were to pass away, and I don't want him to think he would have to go back to work to support the kids.  He wouldn't have to, based on the assets we have, the SSI he would get and the life insurance policy we had before I just increased my work sponsored plan. But I know how he is and I know he would stress out. So at the moment, I am way over insured.  My plan is to continue slowly educating him about the bills and budget, and what to do if I were to pass, so that I can drop down some of the insurance. It's very cheap through work at this point anyway, so it's worth the extra $20 a month or so, so that I heave peace of mind.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 09:22:25 AM
We don't have it and likely never will. Reasoning :

1. Currently no kids
2. By the time we have kids we will have over 750k net worth.

End of reasoning. 

IMO it's a tax on those who chose not to save or had a kid earlier than they were ready. No other reason to really have it.


LOL, so you've discovered the cheat code "your spouse doesn't die until all your plans are in order and you have enough money saved up that you don't need it".  What's the secret?

what do you mean cheat code you dont trust your spouse to be able to take care of themselves should you die.  wow lotta faith you have in your spouse there.  there is an entire MMM Post on life insurance and most of his opinions align closely with mine. 

Direct quote from his insurance post

My wife and I have never carried life insurance on ourselves, and we consider it a compliment to each other: “I believe you would do Just Fine if I wasn’t around, because you’re a capable and independent person”.

http://www.mrmoneymustache.com/2011/06/02/insurance-a-tax-on-people-who-are-bad-at-math/

One thing for certain is that neither you nor your wife has absolutely any idea how either of you would actually cope if just today one of you didn't come home from work ever again.  You can delude yourself into thinking that you'd soldier on successfully or that your wife's inner stoic would be released and she would move on and be successful, but unless you've actually been there and lost a spouse or child then you haven't a clue what will actually happen to you.  You could just as easily fall into a spiral of depression and lose all means of income.

Odds are in your favor, you'll probably continue to see each other each evening after work, but you never know if and you never know when.  Hopefully never but it could be tomorrow or next week.  That's what insurance is for.  You're certainly free not to purchase it, and you'll probably be ok.  But don't pretend you have some superior plan when the basis of your financial security is anchored around nothing bad actually happening until you have 750k and are ready to have children.

the basis of this plan has nothing to do with having 750k -

this plan has nothing to do with nothing bad happening until we get 750k - thats just when we have kids -

i work
my wife works

3 scenarios could unfold here

1. i die
2. she dies
3. we both die


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
2. she dies - i keep working -
3. we both die - our families get over half a million to plan our funeral.  better have lots of booze.

if you have two able bodied people with no children having life insurance is a waste of your money plain and simple.  regardless of your networth.  if you lead a lifestyle that requires both of your paychecks you need to find a new blog.

i mean if you want to plan for all hyperbole's go ahead but that list starts to get really lengthy and pretty soon you'll be in a bomb shelter stocked with anti depressants living off canned beans so you can survive that nuclear winter and then start popping the antidepressants when you're the last of your relatives left in your bunker.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: big_owl on April 29, 2016, 09:34:05 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 09:39:23 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: big_owl on April 29, 2016, 09:46:27 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: frugaliknowit on April 29, 2016, 09:48:30 AM
I am single with no dependents.  I only have 50K from work.  If I did not have that, I wouldn't have any as no one is dependent on me.  I have more than enough liquid/near liquid assets (with family as beneficiaries) to dispose of my body when the time comes.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 09:49:54 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: notactiveanymore on April 29, 2016, 10:24:38 AM
Right now we're DINKS making ~80k gross and we've been focusing on debt-payoff before we dig in to retirement savings. We have 9k left of 55k in 6.8% student loans that we've been paying aggressively for the last 18 months. We'll be done with that in July then we're going to jack up our contributions and also save an emergency fund of 6 months expenses. Then we're going to save for a 15-20% downpayment on a home with payments that could easily be covered by either single income. We plan to have children in the next couple years.

Currently, I've got a free 20k life insurance policy through work along with employer-covered long-term disability insurance. My husband also has LTD through work and we've got a 200k term policy on him.

Before we have children, we're going to get him a new policy for about 400k, cancel his old policy (he was overweight before and would get better rates now), and do about 400k on me as well.

The reason we had life insurance on him before we had any kids is related to his sister. She was married for several years with no kids and her husband died in a plane crash along with his step-dad. The life insurance policy gave her enough to pay off the house and take several months off full-time work. Losing a spouse is the #1 most stressful thing that can happen to someone, and so we feel it's an appropriate thing to insure. My husband watched his sister go through it and is adamant that I have the same cushion to fall back on should something happen to him.

Now, our policies will be very cheap for 20 year terms. I don't know that I'd pay as much as OP described for both those types of insurance. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: beltim on April 29, 2016, 10:29:28 AM
if you have two able bodied people with no children having life insurance is a waste of your money plain and simple.  regardless of your networth.  if you lead a lifestyle that requires both of your paychecks you need to find a new blog.

This is obviously not categorically true.  It's great if you and your spouse can both find work in your chosen careers where you live, but many people choose to optimize one person's career over the others.  In these cases, life insurance on the "optimized career" spouse makes sense in order to give the other spouse the financial flexibility and time to transition back to their career – which almost always results in a much lower salary.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: pdxvandal on April 29, 2016, 10:32:54 AM
I bought term life in 2007 ($250k for $18 per month) thinking wife and I might have a child someday. Well, we did a few years after that, and I kept it through the early years of the kid's life.

Our net worth went from about 125k in 2007 to about 700k today, so I decided to cancel the policy a few months ago. Plus I have one through work worth about 70k if I die. PLUS, there are social security survivor benefits paid to both spouse AND child if I croak.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Paul der Krake on April 29, 2016, 10:51:59 AM
I bought term life in 2007 ($250k for $18 per month) thinking wife and I might have a child someday. Well, we did a few years after that, and I kept it through the early years of the kid's life.

Our net worth went from about 125k in 2007 to about 700k today, so I decided to cancel the policy a few months ago. Plus I have one through work worth about 70k if I die. PLUS, there are social security survivor benefits paid to both spouse AND child if I croak.
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!
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 11:28:17 AM
I bought term life in 2007 ($250k for $18 per month) thinking wife and I might have a child someday. Well, we did a few years after that, and I kept it through the early years of the kid's life.

Our net worth went from about 125k in 2007 to about 700k today, so I decided to cancel the policy a few months ago. Plus I have one through work worth about 70k if I die. PLUS, there are social security survivor benefits paid to both spouse AND child if I croak.
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!

holy hell thats almost 50k a year for me. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: bognish on April 29, 2016, 12:56:50 PM
I am with Boarder42. I don't understand why anyone would need to payoff an entire mortgage at the time a spouse died. Ever since I have been married, and now with kids too, I have had enough of a stash to cover living expenses for a few years. That should give the surviving spouse enough time to either downsize the house, find a decent paying job or both. Sure a change of lifestyle might be required, but nothing drastic. I have faith that my spouse can survive on her own and with the help of extended family if need be. I am sure there are some low probability events that could make me regret not having insurance, but I am comfortable with the risk and that my family could adapt. Definitely if the option is spending $300 per month to insure a health adult.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: VaCPA on April 29, 2016, 01:12:01 PM
I am with Boarder42. I don't understand why anyone would need to payoff an entire mortgage at the time a spouse died. Ever since I have been married, and now with kids too, I have had enough of a stash to cover living expenses for a few years. That should give the surviving spouse enough time to either downsize the house, find a decent paying job or both. Sure a change of lifestyle might be required, but nothing drastic. I have faith that my spouse can survive on her own and with the help of extended family if need be. I am sure there are some low probability events that could make me regret not having insurance, but I am comfortable with the risk and that my family could adapt. Definitely if the option is spending $300 per month to insure a health adult.

Possibly depends on where people live too. In HCOL areas the insurance is probably needed to keep the house for dual income households not yet FI. I know that's the case in our situation. My wife couldn't carry the mortgage by herself with all the other expenses even though she makes pretty good money and we're nowhere close to paying it off. Yeah she'd survive without me but downsizing with kids while dealing with the death of a spouse wouldn't be fun for her. The minimal cost of insurance is worth it to know she could pay off the house and stay. Also I'm risk averse so I'm not willing to say ehh it probably won't happen, especially when we're talking about a measly $40/month. To each their own though
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 29, 2016, 01:34:50 PM
I am with Boarder42. I don't understand why anyone would need to payoff an entire mortgage at the time a spouse died. Ever since I have been married, and now with kids too, I have had enough of a stash to cover living expenses for a few years. That should give the surviving spouse enough time to either downsize the house, find a decent paying job or both. Sure a change of lifestyle might be required, but nothing drastic. I have faith that my spouse can survive on her own and with the help of extended family if need be. I am sure there are some low probability events that could make me regret not having insurance, but I am comfortable with the risk and that my family could adapt. Definitely if the option is spending $300 per month to insure a health adult.

Possibly depends on where people live too. In HCOL areas the insurance is probably needed to keep the house for dual income households not yet FI. I know that's the case in our situation. My wife couldn't carry the mortgage by herself with all the other expenses even though she makes pretty good money and we're nowhere close to paying it off. Yeah she'd survive without me but downsizing with kids while dealing with the death of a spouse wouldn't be fun for her. The minimal cost of insurance is worth it to know she could pay off the house and stay. Also I'm risk averse so I'm not willing to say ehh it probably won't happen, especially when we're talking about a measly $40/month. To each their own though

yeah thats only worth 34k at the end of 20 years at 11% interest.  i also dont understand why you would ever buy a house that one person's salary could not support (when you claim you both make good money) ... we get the HCOL area people here all the time.  Just move if i cant make 5x my salary i'm not living in a place that costs 5x more than i live now.  you just increased the HCOL area by adding insurance on top of it WHY LIVE THERE. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: VaCPA on April 29, 2016, 02:08:41 PM
I am with Boarder42. I don't understand why anyone would need to payoff an entire mortgage at the time a spouse died. Ever since I have been married, and now with kids too, I have had enough of a stash to cover living expenses for a few years. That should give the surviving spouse enough time to either downsize the house, find a decent paying job or both. Sure a change of lifestyle might be required, but nothing drastic. I have faith that my spouse can survive on her own and with the help of extended family if need be. I am sure there are some low probability events that could make me regret not having insurance, but I am comfortable with the risk and that my family could adapt. Definitely if the option is spending $300 per month to insure a health adult.

Possibly depends on where people live too. In HCOL areas the insurance is probably needed to keep the house for dual income households not yet FI. I know that's the case in our situation. My wife couldn't carry the mortgage by herself with all the other expenses even though she makes pretty good money and we're nowhere close to paying it off. Yeah she'd survive without me but downsizing with kids while dealing with the death of a spouse wouldn't be fun for her. The minimal cost of insurance is worth it to know she could pay off the house and stay. Also I'm risk averse so I'm not willing to say ehh it probably won't happen, especially when we're talking about a measly $40/month. To each their own though

yeah thats only worth 34k at the end of 20 years at 11% interest.  i also dont understand why you would ever buy a house that one person's salary could not support (when you claim you both make good money) ... we get the HCOL area people here all the time.  Just move if i cant make 5x my salary i'm not living in a place that costs 5x more than i live now.  you just increased the HCOL area by adding insurance on top of it WHY LIVE THERE.

I mean I could explain why we like where we live, and all the benefits it provides, despite the HCOL. But I know from this thread and others you wouldn't ever understand and it would just derail the thread, so why bother? Obviously I'm not crazy or places like DC, NY, Boston, etc would be deserted, but they are quite the opposite.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: csprof on April 29, 2016, 07:33:05 PM
I mean I could explain why we like where we live, and all the benefits it provides, despite the HCOL. But I know from this thread and others you wouldn't ever understand and it would just derail the thread, so why bother? Obviously I'm not crazy or places like DC, NY, Boston, etc would be deserted, but they are quite the opposite.

He's clueless.  I wouldn't bother engaging.  There are many paths through life -- and some of them even involve finding acceptance and compassion for other people's choices, even when we disagree with them.  Not all do. :)

Having watched my own family go through the death of my father when I was six -- I'm 100% with you.  I spend 0.2% of my income on life insurance, and that's worth it in my calculation.

Insurance is a great invention for hedging against rare but potentially catastrophic events.  The "mis-use" of insurance is to insure against the small stuff when you can self-insure.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Zikoris on April 29, 2016, 07:55:18 PM
No, because we're a childfree couple with plenty of cash.

Technically, we both have small policies through our employers that are mandatory. I think it's for one or two years of salary, which is not a huge amount for us.

There's one thing I don't really get about this whole "what if your spouse dies and you're too distraught to work" thing... Well, wouldn't most of us here be able to EASILY take a year off work or more to grieve? If you have a reasonably optimized life, shouldn't that only be somewhere between $10K-$25K for an ENTIRE YEAR of grieving? I mean, I do clerical work in the most expensive city in Canada and I could quit for a year without a second thought, so there's not much excuse for software engineers making the big bucks to be unable to. I mean, it would delay your early retirement somewhat, but then you'd also need less money to retire since you'd only be supporting one person. Heck, you might even be able to retire immediately depending how much you were up to pre-death.
Title: Life insurance: What is your Mustacian logic for having or not having it?
Post by: elaine amj on April 29, 2016, 09:17:27 PM
I bought term life in 2007 ($250k for $18 per month) thinking wife and I might have a child someday. Well, we did a few years after that, and I kept it through the early years of the kid's life.

Our net worth went from about 125k in 2007 to about 700k today, so I decided to cancel the policy a few months ago. Plus I have one through work worth about 70k if I die. PLUS, there are social security survivor benefits paid to both spouse AND child if I croak.

We had about $500k in term life on my DH since the kids were little (I was a SAHM then) for about $35 a month. Like many others, I wanted the luxury of having the option not to have to worry about returning to work for many years. We decided not to insure me since DH felt he would be comfortable continuing to work and that he would be able to care for the kids with his income. A few months ago, we realized our stash was pretty close to FIRE levels and that the term life was rather unnecessary. Mortgage will be done this summer and I'd be fine with the stash. So we canceled it.

Of course, just 1 month later, he gets diagnosed with cancer. So far treatments are going well - I still think we made the right decision at that time to cancel although we did groan a little :) He did have disability through work so we got an extra $50k. So far extra expenses have been reasonable - about $5-7k so not too bad yet. We're in Canada so no co-pays/deductibles, which helps. Plus short-term disability leave is generous - we get 75% of his regular pay so currently estimating that we will only lose out on $3-4K of pay. The $50k was a nice bonus, but we'd be just fine without it too.


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Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: cchrissyy on April 29, 2016, 09:23:53 PM
You're overpaying for life insurance.
I have 250k term and it is $33 a month, not $300. 

I think I had  a 10-year term in my 20s for $20 per month when that term ended I locked in a 20 year term policy for $33 per month.

Even if had no kids and no possible justification for needing the insurance, honestly, I'd still take the deal and pay $33 monthly to give my siblings or friends or a charity a nice extra payout.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: big_owl on April 30, 2016, 04:47:25 AM
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? 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: lostamonkey on April 30, 2016, 06:01:33 AM
I am single with no dependents.  I only have 50K from work.  If I did not have that, I wouldn't have any as no one is dependent on me.  I have more than enough liquid/near liquid assets (with family as beneficiaries) to dispose of my body when the time comes.

My situation is pretty similar. Additional life insurance would be a waste of money for me. If I die young, my parents are already getting a decent amount money from my stash+work life insurance.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: LouLou on April 30, 2016, 08:06:09 AM
I bought term life in 2007 ($250k for $18 per month) thinking wife and I might have a child someday. Well, we did a few years after that, and I kept it through the early years of the kid's life.

Our net worth went from about 125k in 2007 to about 700k today, so I decided to cancel the policy a few months ago. Plus I have one through work worth about 70k if I die. PLUS, there are social security survivor benefits paid to both spouse AND child if I croak.

To me, this makes perfect sense.  The life insurance is a great backup for families in the asset building phase that may not be necessary later. My mom is also my secondary beneficiary for my life insurance policy from work, so that could help with major medical expenses or long term care for her if I was gone.

I am with Boarder42. I don't understand why anyone would need to payoff an entire mortgage at the time a spouse died. Ever since I have been married, and now with kids too, I have had enough of a stash to cover living expenses for a few years. That should give the surviving spouse enough time to either downsize the house, find a decent paying job or both. Sure a change of lifestyle might be required, but nothing drastic. I have faith that my spouse can survive on her own and with the help of extended family if need be. I am sure there are some low probability events that could make me regret not having insurance, but I am comfortable with the risk and that my family could adapt. Definitely if the option is spending $300 per month to insure a health adult.

My husband and I could easily survive on one income because our incomes are high and we designed our lives that way.  But  death of a parent is intensely difficult for children, and I would want my husband to pull way back from work and focus on the kids, without having to think about money.  I don't think the entire mortgage needs to be paid off, but it is a luxury that would help him focus on our family. Downsizing could also mean a big move and potential school district change, and I would hate for my future children to have to deal with that soon after I died.  Kids are resilient, but I know people whose parents died when they were young and it is tough for them to this day.  If one of us died after we became FI, then insurance seems superfluous.  But to me, insurance makes sense before that point.

No, because we're a childfree couple with plenty of cash.

Technically, we both have small policies through our employers that are mandatory. I think it's for one or two years of salary, which is not a huge amount for us.

There's one thing I don't really get about this whole "what if your spouse dies and you're too distraught to work" thing... Well, wouldn't most of us here be able to EASILY take a year off work or more to grieve?

Grief hits people in unexpected ways, especially with the death of very close loved one.  It also depends on the circumstances.  I have relative whose husband died from cancer over the course of a year. He was a fun loving guy full life until he was unexpectedly sick and dying. Watching your best friend slowly die is so painful!  I think she would have had a "normal" grieving period if that was it, but then she was diagnosed with cancer as well that same year.  (Turns out a creek they have lived near for decades may be contaminated - cancer rates are suspiciously high in that area).  So she was undergoing treatment, while caring for her husband and watching him die.  It was just too much for her, and I don't look down on her for that.

They were older with no kids together, so between their assets, life insurance, and social security she's fine.  But I know couples who simultaneously had cancer with young kids at home.  They ended up both surviving, but life insurance seems like a good idea in that situation.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 30, 2016, 08:20:51 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on April 30, 2016, 08:53:52 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on April 30, 2016, 10:14:38 AM
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.

MODERATOR
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: okits on May 01, 2016, 02:51:26 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: dagagad on May 01, 2016, 03:09:10 PM
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,
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on May 01, 2016, 08:02:37 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: okits on May 05, 2016, 11:35:51 PM
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?)
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: MustachianAccountant on May 06, 2016, 01:46:40 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: barbaz on May 06, 2016, 02:15:51 AM
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.)
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: MustachianAccountant on May 06, 2016, 03:24:41 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 06:13:57 AM
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. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Le Barbu on May 06, 2016, 08:39:39 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Daisyedwards800 on May 06, 2016, 08:58:00 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Daisyedwards800 on May 06, 2016, 09:01:08 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 09:02:19 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Daisyedwards800 on May 06, 2016, 09:07:47 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Daisyedwards800 on May 06, 2016, 09:12:56 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 10:08:43 AM
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.

Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: okits on May 06, 2016, 11:05:08 AM
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.)
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Paul der Krake on May 06, 2016, 11:06:10 AM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: StockBeard on May 06, 2016, 12:39:54 PM
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 (http://www.mrmoneymustache.com/rl360-insurance/). 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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Daisyedwards800 on May 06, 2016, 12:52:50 PM
agree to disagree
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: desertadapted on May 06, 2016, 01:15:59 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: StockBeard on May 06, 2016, 01:46:37 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 01:54:29 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: CanuckExpat on May 06, 2016, 01:56:19 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 02:00:49 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: SomedayStache on May 06, 2016, 02:47:38 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 03:31:53 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: desertadapted on May 06, 2016, 04:02:58 PM
Quote
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. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on May 06, 2016, 04:17:59 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: serpentstooth on May 06, 2016, 04:34:15 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: jim555 on May 06, 2016, 04:43:08 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: serpentstooth on May 06, 2016, 05:18:17 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: StockBeard on May 06, 2016, 05:29:35 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 06, 2016, 06:12:31 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: desertadapted on May 06, 2016, 06:16:33 PM
Quote
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.
 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: StockBeard on May 06, 2016, 06:18:57 PM
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
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on May 06, 2016, 06:28:32 PM
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.



Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: MrsPete on May 06, 2016, 07:17:58 PM
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. 


Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: VaCPA on May 06, 2016, 08:28:33 PM
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...
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: serpentstooth on May 06, 2016, 08:43:59 PM
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!
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on May 06, 2016, 08:46:58 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 08, 2016, 06:24:10 PM
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
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: boarder42 on May 08, 2016, 06:27:01 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: jrhampt on May 09, 2016, 06:46:55 AM
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. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: MrsDinero on May 09, 2016, 09:56:50 AM
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. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: csprof on May 09, 2016, 09:02:19 PM
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.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Le Barbu on May 10, 2016, 07:22:25 AM
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!
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Allie on May 10, 2016, 11:53:54 AM
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. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: barbaz on May 12, 2016, 02:02:05 AM
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.
Right? Its almost as if this entire flamewar thread could be replaced with a calculator.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Torran on May 12, 2016, 02:59:07 AM
Finding this really interesting. I've just bought a flat and the mortgage provider are pushing hard for me to take on critical illness/life insurance.

I have student loan debt of £9000. And obviously the mortgage. But nobody depends on me financially. So, if I died tomorrow I kinda just think my parents would sell the flat and that would pretty much wrap up my finances. In Scotland my student loan would be written off if I died.

I think it's a bad idea to pay out for insurance. This thread is really helping to see how others with a more mustachian mindset feel about it.

Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Proud Foot on May 12, 2016, 10:01:54 AM
I think there are too many variables to make a flat statement of term life insurance being good or bad.  I think nearly everyone here would agree that whole life is a bad choice. 

My wife and I both have term life insurance on ourselves.  With a currently negative net worth and toddler it is important for us to have the insurance in the event either one of us passed away.  Her coverage is enough that I would be able to pay off all our debts, pay for a funeral, and have enough left over to help support a few months as I adjusted to living off my income.  My coverage is a lot higher as I make a lot more than she does and she is currently taking classes part time with the goal of going to PA school in the next 2 years.  The amount we chose for me would pay off the debts, the funeral, and provide living expenses until she completes PA school and is able to make more.  We chose short terms as we each would be able to earn enough to support ourselves and our child(ren) off one income once she is a PA. We will most likely not renew the policies once we reach the end of the term.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: BlueMR2 on May 12, 2016, 10:09:48 AM
I have the insurance provided automatically through work.  It's enough to bury me.  Even that is unnecessary.

We've never had life insurance beyond that.  There's no point for us.  Either one of us could continue to live on our own income.  We have no dependents to worry about.  It just seems silly to throw money at something where odds are we'd end up getting a smaller lump sum back in the future, when we have no need of that lump sum.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: PhysicianOnFIRE on May 12, 2016, 10:59:30 AM
Family of 4, single income. I carried $1 million term life insurance on myself for 8 or 9 years. Hit FI and stopped paying the premium a year or two before the 10-year policy expired.

Disability has been dropped as well. If I would have been thinking and paying closer attention, I could have reduced the disability coverage on the way to FI. WCI had a well-written guest post (http://whitecoatinvestor.com/when-to-drop-replace-modify-or-decrease-your-disability-insurance-coverage/) on this topic.

Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on May 12, 2016, 04:56:34 PM
I think nearly everyone here would agree that whole life is a bad choice.

See my post on my whole life policy. If people would put their biases aside and do the calculation, they would see the policy I have as the equivalent of a low-cost, 6-8% per year tax-free, savings account. But most people won't put their biases aside and just consider me to be an idiot.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on May 12, 2016, 05:19:36 PM
I think nearly everyone here would agree that whole life is a bad choice.

See my post on my whole life policy. If people would put their biases aside and do the calculation, they would see the policy I have as the equivalent of a low-cost, 6-8% per year tax-free, savings account. But most people won't put their biases aside and just consider me to be an idiot.

You don't have nearly enough detail in your previous post to have determined if it was a good financial decision.


People on here hate it when I explain how good our whole life policies are.  We own two, one on me and one on her:

$250k initial death benefit, $626.20/mo for 60 months.  It will be paid off in October this year.
The death benefit grows every month.
The cash value credits at 6.5% to 7.5%, with a minimum of 4% growth.
The cumulative administrative expenses (excluding the cost of insurance) over those five years is .29%, or about the cost of an index fund.
The expenses are fixed at $110/year, but the cash value will continue to rise, meaning the already low expenses will approach zero.
The other expense is the cost of the insurance, which is about $114/year.
The cash value builds tax-deferred, but I can take out what I paid into it tax-free.
All proceeds are tax free if used for long term care or if the beneficiaries take it when I croak.

In sum the benefits are:  low cost (and getting lower), tax-deferred growth, guaranteed growth, three options for tax-free withdrawals.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: beltim on May 12, 2016, 07:15:54 PM
I think nearly everyone here would agree that whole life is a bad choice.

See my post on my whole life policy. If people would put their biases aside and do the calculation, they would see the policy I have as the equivalent of a low-cost, 6-8% per year tax-free, savings account. But most people won't put their biases aside and just consider me to be an idiot.

You don't have nearly enough detail in your previous post to have determined if it was a good financial decision.

  • What is your premium?  1
  • How much have you paid into the insurance historically? 2
  • How long have you had the policy? 3
  • What is your current cash-value? 4

People on here hate it when I explain how good our whole life policies are.  We own two, one on me and one on her:

$250k initial death benefit, 1: $626.20/mo  2,3: for 60 months.  It will be paid off in October this year.
The death benefit grows every month.
The cash value credits at 6.5% to 7.5%, with a minimum of 4% growth.
The cumulative administrative expenses (excluding the cost of insurance) over those five years is .29%, or about the cost of an index fund.
The expenses are fixed at $110/year, but the cash value will continue to rise, meaning the already low expenses will approach zero.
The other expense is the cost of the insurance, which is about $114/year.
The cash value builds tax-deferred, but I can take out what I paid into it tax-free.
All proceeds are tax free if used for long term care or if the beneficiaries take it when I croak.

In sum the benefits are:  low cost (and getting lower), tax-deferred growth, guaranteed growth, three options for tax-free withdrawals.

1,2,3 are given in the text.
4. is calculable from the data given
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on May 12, 2016, 07:31:11 PM
I think nearly everyone here would agree that whole life is a bad choice.

See my post on my whole life policy. If people would put their biases aside and do the calculation, they would see the policy I have as the equivalent of a low-cost, 6-8% per year tax-free, savings account. But most people won't put their biases aside and just consider me to be an idiot.

You don't have nearly enough detail in your previous post to have determined if it was a good financial decision.

  • What is your premium?  1
  • How much have you paid into the insurance historically? 2
  • How long have you had the policy? 3
  • What is your current cash-value? 4

People on here hate it when I explain how good our whole life policies are.  We own two, one on me and one on her:

$250k initial death benefit, 1: $626.20/mo  2,3: for 60 months.  It will be paid off in October this year.
The death benefit grows every month.
The cash value credits at 6.5% to 7.5%, with a minimum of 4% growth.
The cumulative administrative expenses (excluding the cost of insurance) over those five years is .29%, or about the cost of an index fund.
The expenses are fixed at $110/year, but the cash value will continue to rise, meaning the already low expenses will approach zero.
The other expense is the cost of the insurance, which is about $114/year.
The cash value builds tax-deferred, but I can take out what I paid into it tax-free.
All proceeds are tax free if used for long term care or if the beneficiaries take it when I croak.

In sum the benefits are:  low cost (and getting lower), tax-deferred growth, guaranteed growth, three options for tax-free withdrawals.

1,2,3 are given in the text.
4. is calculable from the data given

So if I understand this means:


Am I understanding this all correctly? So the current value is roughly $35k?
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on May 13, 2016, 04:40:54 AM
So if I understand this means:

  • Total premiums = $626.20 * (60 - 5) = $34,441 total paid
  • $110/year in expenses = about $500 total expenses
  • $114/year in insurance cost ($9.50/month) = $9.50 * (60 - 5) = $522 total premiums
  • Current cash value = about $35,000 (depending on interest rate)

Am I understanding this all correctly? So the current value is roughly $35k?

There are six months left.  I've paid in $33,814.80.  The current cash surrender value is $37,0457.74.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: ender on May 13, 2016, 06:11:46 AM
So if I understand this means:

  • Total premiums = $626.20 * (60 - 5) = $34,441 total paid
  • $110/year in expenses = about $500 total expenses
  • $114/year in insurance cost ($9.50/month) = $9.50 * (60 - 5) = $522 total premiums
  • Current cash value = about $35,000 (depending on interest rate)

Am I understanding this all correctly? So the current value is roughly $35k?

There are six months left.  I've paid in $33,814.80.  The current cash surrender value is $37,0457.74.

If you would have invested that same amount of money into an SP500 index monthly during that timeframe and bought a $10/month $250k term policy instead, you would have about $41,000 now. This represents an opportunity cost of about $4,000 to have that whole life policy, since you purchased it.

I couldn't find SP500 divided reinvested monthly return data to use, though, so I just used the SP500 monthly return data. If you were to include divided reinvestments the opportunity cost gets higher.

And in the off chance you aren't fully using tax advantaged space (401k, IRA, 403b, HSA, etc) this is considerably worse as you are also paying taxes on whatever sum of money you put into the whole life policy instead of those plans.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: beltim on May 13, 2016, 09:08:58 AM
So if I understand this means:

  • Total premiums = $626.20 * (60 - 5) = $34,441 total paid
  • $110/year in expenses = about $500 total expenses
  • $114/year in insurance cost ($9.50/month) = $9.50 * (60 - 5) = $522 total premiums
  • Current cash value = about $35,000 (depending on interest rate)

Am I understanding this all correctly? So the current value is roughly $35k?

There are six months left.  I've paid in $33,814.80.  The current cash surrender value is $37,0457.74.

If you would have invested that same amount of money into an SP500 index monthly during that timeframe and bought a $10/month $250k term policy instead, you would have about $41,000 now. This represents an opportunity cost of about $4,000 to have that whole life policy, since you purchased it.

Sure, and if he invested it in Greek stocks it would have been worth something else.  Neither is a comparison to make.  This is comparable to a bond, not a stock.

And the effective interest rate he's gotten so far is 5.4% annually.  Pretty darn good for a bond.  Vagabond, where did you get this policy?  I haven't seen interest rates on whole life policies this good.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on May 14, 2016, 05:57:51 AM

If you would have invested that same amount of money into an SP500 index monthly during that timeframe and bought a $10/month $250k term policy instead, you would have about $41,000 now. This represents an opportunity cost of about $4,000 to have that whole life policy, since you purchased it.


Term policy:  this is betting against a life insurance company, something I'm not smart enough to do.  I don't need the life insurance, but this policy is a outstanding tax-deferred (or tax-free, if I don't use it or only use it for long-term care) savings account.

Buy term and invest the remainder:  This is also Suze Orman and Dave Ramsey advice.  It's okay for some, but not for entrepreneurs and business owners that take calculated risks.

Opportunity cost:  True, but so what?  The thread was about life insurance.  I have plenty of other individual stocks, funds, and rental houses.


I couldn't find SP500 divided reinvested monthly return data to use, though, so I just used the SP500 monthly return data. If you were to include divided reinvestments the opportunity cost gets higher.


I use this DRIP calculator:  https://www.dividendchannel.com/drip-returns-calculator/.  Choose VOO, SPY, or another S&P 500 ETF.  May have to adjust the dates to after the fund's inception.


And in the off chance you aren't fully using tax advantaged space (401k, IRA, 403b, HSA, etc) this is considerably worse as you are also paying taxes on whatever sum of money you put into the whole life policy instead of those plans.

I paid 7.2% effective tax rate for 2015.  2016 will be even lower, perhaps even half that.  I think you will be hard pressed to find someone who tax-plans more than me.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: Vagabond76 on May 14, 2016, 05:59:11 AM
And the effective interest rate he's gotten so far is 5.4% annually.  Pretty darn good for a bond.  Vagabond, where did you get this policy?  I haven't seen interest rates on whole life policies this good.

AAFMAA.  Have to be a vet to qualify.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: The Happy Philosopher on May 14, 2016, 02:24:44 PM
The vast majority of people who need/want life insurance should probably be buying level premium or annual renewable term life insurance. These are cheap and the market is incredibly efficient. They are not investments but hedges against death and loss of income. Without kids or dependents it is doubtful one would want/need it.

Kids + not FI = you should probably have some term life insurance.

I know the spouse can go back to work, yadda yadda, but the reality is if there is a stay at home parent it is usually the one with lower earning potential. Now that there is one parent there are child care costs. I'm not sure why anyone would not hedge that risk unless they were so low income it didn't really matter and the premiums would become a burden. It's just so cheap to do.

Whole life insurance is another beast. It is complex, hard to analyze and comes with many footnotes and things most people don't understand about it. Term insurance is dating, whole life insurance is a marriage with kids. Here is a good article (which is not very flattering of whole life). The only time whole life makes sense is if you want/need a permanent death benefit, otherwise the negatives seem to greatly outweigh the positives. I'm sure in some scenarios the asset protection or estate planning would tip the scales, but my sense is that does not apply to most people.

http://financialmentor.com/financial-advice/life-insurance/whole-life-insurance/19216
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: SeaEhm on May 14, 2016, 02:35:08 PM
I have a life insurance policy for peace of mind.

If I pass away, I know that my wife will not have to worry about any financial issues while dealing with the loss of a loved one (I hope I am loved, haha)

Insurance offers peace of mind.  Extended warranties on cars offer peace of mind.  Some people find comfort knowing that in an extreme and unlikely case, things will be taken care of.

Are you that type of person?  No?  Then don't get life insurance. Yes? get life insurance. 
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: formerlydivorcedmom on May 16, 2016, 01:48:07 PM
This isn't applicable to the OP's situation, but may be for others reading.

My husband and I are in our second marriages raising three elementary-aged children.  If one of us dies, the other will not receive Social Security survivor benefits, because we have no children together.   That means that we'll have to rely on our own incomes and savings.

I'm currently the sole breadwinner, and my husband is a full-time student/part-time SAHD.  We expect him to graduate in two years with a starting salary of about 1/3 what I make and then start moving up the career ladder, allowing us to retire in 2028 (at age 49).  We are currently about 25% of the way to FI.

If he dies, the two kids I get to keep and I will live just fine on my salary.  My savings rate will decrease, because I'll have to pay for day care now for now, and then, later, I won't have the increased savings potential we had calculated once he started working.  That would push my FIRE date out several more years.  We took out a $500k 10-year term policy on him so I don't have to worry about that.

If I die, he could live off our savings for quite some times; definitely long enough to finish school and find himself a job.  His retirement would be pushed way out, though, because, even in our long-term planning, I make most of the money.  We have about $900k of life insurance on me (combo of work-paid insurance and a 15-year term policy taken out 2 years ago). 

We pay about $100/month for the policies, which is worth it to me in terms of peace of mind.  I know too many people who died young, and if that were to happen to one of us I don't want the other's financial plans thrown off by too much.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: StockBeard on May 23, 2016, 03:41:27 PM
Interestingly I had a discussion with my father about this. He basically said I was stupid for not having life insurance, while living in the US (in France, where I'm from and where my parents live, apparently unions are powerful enough that pretty much any company will provide some sort of benefits in case of employee death)

He proceeded to give me the example of a cousin of my uncle, who was living in the US, lost his wife, and then burnt through all of his money despite being a millionaire, ended up as a "clerk in a gas station" to make ends meet.

I love my dad and he has been smarter than I am about money, for a long time. But I couldn't help but being frustrated at having yet again another statistically insignificant example of "I know a guy who knows a guy who...". That seems to always be the killer point people give in favor of insurance: "I knew a guy..." . I also can't connect how the guy lost his fortune, then apparently his job, and had to go back to a minimal wage salary afterwards. None of this makes sense and my father didn't give enough details: he was trying to convince me with a bullshit example and I'm sure he made up part of the story.

Bottom line, my parents are shit scared of the US because here it's every man for himself, while in Europe the community as a whole apparently handles it better.

I checked with my wife, it turns out I have a life insurance on my name, it is crazy expensive (~$5000 a year) which is somewhat justified by the fact that it's coupled with an investment scheme (with great returns of 1% or so...), something I now know is a "no-no" thing to do. To make things even more complicated, that policy was open in Japan (where my wife is from). Next time we go to Japan I'll have to cancel that thing, but am now considering opening some other form of life insurance, as I'm growing concerned that my plan for my wife and kids does not take into account the potentially insane taxes that could be taken from my brokerage account in case of death.

So, bottom line is I'm kind of back-pedaling on some of the stuff I said before. One can be FI, but what happens to your money at death could be complicated if you're in a situation like mine (expat), some of your "passive income" streams might not be so passive, and so your significant other could have trouble getting all the money back. So, being FI now is not the end of the calculation, one needs to understand what happens to the money in case of death (or disability == increased expenses), and if the current stash would cover it.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: thd7t on May 23, 2016, 06:49:40 PM
My wife and I have some term life insurance through work and some through a paid policy. I think of it as a gift to the other in the event of our death. A lot of people point out that their spouses could get by on one salary, but it would be nice to leave the survivor closer to/at FIRE. We also have 2 kids.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: barbaz on May 24, 2016, 05:17:13 AM
He proceeded to give me the example of a cousin of my uncle, who was living in the US, lost his wife, and then burnt through all of his money despite being a millionaire, ended up as a "clerk in a gas station" to make ends meet.
How is that even an argument? You could as well use it to argue against a life insurance: Yeah, sure, you'll get a lot of money but then you will burn through it and end up poor anyway, so why bother paying for it?
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: TravelJunkyQC on May 24, 2016, 07:24:04 AM
I'm nowhere near FI, however, I have no dependents.

I have a rental condo with an investing partner - we both decided to forego life insurance since we are both able to cover the cost of the condo in full, even if it wasn't rented (we have a contract stating that in the event of my death, my shares are passed on to her freely - and vice versa).

I live in my partner's condo. We haven't combined finances, and neither is dependent on the other's income. He has life insurance for his condo, but I am not the beneficiary (his sister, who is still in uni, is - I am completely comfortable with this, as we had already discussed this).

The day he and I buy a house together, and/or have children, we will both have life insurance, but until then, I have enough assets to bury me and have a kick-ass funeral party, and leave a sizeable amount to my sister afterwards.
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: calimom on May 24, 2016, 09:02:48 PM
My 37 year old husband died on his way home from work one day - he was killed by a drunk driver. We probably thought we were doing a lot things right financially: we had no debt, we had savings (hoping to one day buy a house in our HCOL area) and we had a $50K term life insurance policy as well as coverage of one year's salary from his employer. At the time I was a SAHM and our kids were 1,5, and 14.

Looking back, the $50K policy should have been $500K. The premiums would have been just dollars more per month. Our auto insurance coverage eventually paid out for an uninsured motorist for about $100K which did help a a quite a bit, as did the social security benefits our minor children where entitled to, and my two younger children will continue to receive for the next 9 years. I did move to a much more affordable town, both for family support and for financial reasons. With more money I would have likely stayed put. I used our savings toward a down payment on a house that would have been 4 or 5 times more expensive in the SF Bay Area but was pretty affordable where we moved. I used what insurance money we had to invest in rental property and a small business and have "paid" it back to my investment account. You outsource a fair amount of stuff when you're one parent down, like housecleaning, yard care, repair and such. Not to mention other odd things like play therapy for your kids and trips to places like Lego Land that you otherwise might not do, but do in any case because it might make your 5 year old smile.

It would have been better to have more insurance, and I'm not talking about cruises or wardrobe. One child is though college (on a full scholarship, she's smart!) and I have two more to go. I'd be lying to say I don't think about what could have been.
MMM has great insight, but is not always spot on for all of us. Sure, if you're FI at 30, have one child, perfect health and confident nothing bad will ever happen, don't buy life insurance. It's for chumps, right?
Title: Re: Life insurance: What is your Mustacian logic for having or not having it?
Post by: nottoolatetostart on May 25, 2016, 04:43:31 AM
I am so sorry for your loss, calimom. I really have no words. I hope you and your children are coping. It sounds like you took a lot of good steps to do what you could.



Just wanted to pipe in that yes, we have 20-year term life insurance. We each have 750k, which would put either of us well over the line into FI at this point. It's $668 per year for both policies combined which I pay once per year, averaging about $55/month for $1.5MM in coverage. It seems affordable. Plus we have a 3 and 2 yr old at home. If something happened to both of us, our kids would have this money via a trust to use for education, school, launching into the world, etc. We will drop it here in a few years, so it is not calculated in our expenses needed during FI. We got these policies while we were "young" and newly married at 30. My husband also has a policy from his employer for about $150k, which would nearly pay off our mortgage.

Plus, since this premiums are paid with after tax dollars, the receipt of the $750K is a TAX FREE event. Any funds received by your employer may be taxed, since a portion of it is a employer benefit. So keep that in mind when planning too.

Before I found MMM, we had another term policy for an extra $1MM a piece, following the advice of many financial pundits who say 20-25X your INCOME. So you all saved us money when we scaled that back to 25X our EXPENSES.

Hope this helps!

People should not underestimate how it may be difficult to get insurance with family disease, disease/illness that you may have, etc. as you age. Do it while you are healthy to keep premiums low.