Author Topic: Life insurance: What is your Mustacian logic for having or not having it?  (Read 75237 times)

K-ice

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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."



 



seattlecyclone

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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.

VaCPA

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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.
« Last Edit: April 28, 2016, 04:50:25 PM by anorman79 »

Eric

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With no kids, no house, and dual incomes, it would just be an unneccesary expense.

Vagabond76

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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.

big_owl

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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. 

boarder42

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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.

Vagabond76

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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.

csprof

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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.

boarder42

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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

big_owl

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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?

Fishindude

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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.

VaCPA

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

Paul der Krake

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

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

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

Drifterrider

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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.

boarder42

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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/

« Last Edit: April 29, 2016, 05:33:19 AM by boarder42 »

boarder42

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

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

Plot summary from IMDB

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

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

Also the human race may not exist now if early man didnt just breed, but we have reached a point of intelligence where we dont just breed like animals anymore - hence the race can be survived and prosper with well thought out and planned children having.  There is 0 thing as an accidental child you may not be planning to have one but you dont just wake up pregnant one morning without having executed an action previously.
« Last Edit: April 29, 2016, 05:59:59 AM by boarder42 »

lakemom

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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).
« Last Edit: April 29, 2016, 05:50:33 AM by lakemom »

ender

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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.

Freedomin5

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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.

Guava

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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).

GuitarStv

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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.

VaCPA

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

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

Plot summary from IMDB

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

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

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

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.

DebtFreeBy25

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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. 


boarder42

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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.
« Last Edit: April 29, 2016, 08:45:05 AM by boarder42 »

FLBiker

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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).

big_owl

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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.

slappy

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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.

boarder42

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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.
« Last Edit: April 29, 2016, 09:34:02 AM by boarder42 »

big_owl

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

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

boarder42

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

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

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

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

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

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

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

instead of saving you should be taking out giant insurance policies incanse you incur one of these event that destory your ability to live life.
« Last Edit: April 29, 2016, 09:42:49 AM by boarder42 »

big_owl

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

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

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

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

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

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

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

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

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

frugaliknowit

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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.

boarder42

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

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

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

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

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

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

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

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

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

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

notactiveanymore

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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. 

beltim

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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.

pdxvandal

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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.

Paul der Krake

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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!

boarder42

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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. 
« Last Edit: April 29, 2016, 11:42:33 AM by boarder42 »

bognish

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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.

VaCPA

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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

boarder42

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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. 

VaCPA

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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.

csprof

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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.

Zikoris

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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.

elaine amj

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Life insurance: What is your Mustacian logic for having or not having it?
« Reply #45 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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cchrissyy

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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.
« Last Edit: April 29, 2016, 09:25:51 PM by cchrissyy »

big_owl

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

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

lostamonkey

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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.

LouLou

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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.