Author Topic: Should I drop term life insurance?  (Read 516 times)

moonpalace

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Should I drop term life insurance?
« on: September 03, 2019, 02:55:57 PM »
I'm 43, wife is 41, kids are 14 and 10. Current NW is about $300k, invested assets $250k. We both have pretty stable jobs.

We have $40k in student loans ($882/month), and $250k mortgage (30-year, 3.5%, $1812/month) on a $330k house.

We currently have two policies, $500k each, 20-year term, we're 3 years in. Total cost is $91/month. I also have a non-optional 2 years' salary worth of coverage through work (so, currently, $218k). And if either of us were to die, there would be SS payments for the spouse and surviving kids, too.

We just got on the path to FIRE 2.5 years ago and our NW has increased at a rate of $105k/year since then. Stash contributions are about $60k of that.

I'm feeling like it may be time to drop the life insurance (at least on me, but maybe on both of us). Would welcome any thoughts or opinions on this!

oldladystache

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Re: Should I drop term life insurance?
« Reply #1 on: September 03, 2019, 03:02:58 PM »
Not yet. Reconsider in a couple years.

Dicey

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Re: Should I drop term life insurance?
« Reply #2 on: September 03, 2019, 03:06:51 PM »
Not yet. Reconsider in a couple years.
Yup.

ETA - I am agreeing with oldladystache, not OP.
« Last Edit: September 03, 2019, 03:09:37 PM by Dicey »

honeybbq

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Re: Should I drop term life insurance?
« Reply #3 on: September 03, 2019, 03:30:43 PM »
Agree. You still have two younger kids. Reconsider when they are both out of the house.

v8rx7guy

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Re: Should I drop term life insurance?
« Reply #4 on: September 03, 2019, 03:34:45 PM »
I'm 43, wife is 41, kids are 14 and 10. Current NW is about $300k, invested assets $250k. We both have pretty stable jobs.

We have $40k in student loans ($882/month), and $250k mortgage (30-year, 3.5%, $1812/month) on a $330k house.

We currently have two policies, $500k each, 20-year term, we're 3 years in. Total cost is $91/month. I also have a non-optional 2 years' salary worth of coverage through work (so, currently, $218k). And if either of us were to die, there would be SS payments for the spouse and surviving kids, too.

We just got on the path to FIRE 2.5 years ago and our NW has increased at a rate of $105k/year since then. Stash contributions are about $60k of that.

I'm feeling like it may be time to drop the life insurance (at least on me, but maybe on both of us). Would welcome any thoughts or opinions on this!

I agree with the sentiment above... keep the Term Policies for now.  Follow-up question, why is your payment so high on the student loan(s)?  What is the interest rate and term?

socaso

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Re: Should I drop term life insurance?
« Reply #5 on: September 03, 2019, 03:41:49 PM »
Evaluate again when the older child graduates high school.

SimpleCycle

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Re: Should I drop term life insurance?
« Reply #6 on: September 03, 2019, 03:54:13 PM »
To do the calculation, you need to post your annual expenses as well.  Right now your assets would support $10k a year in expenses.  SS survivor benefits add about $36k/year to that while the children are minors.  So there are two questions:

1. Would the surviving spouse have enough to have some breathing room and adjust to life as a single parent if the other of you died?
2. Would your children have enough to support them if something were to happen to both of you?

I suspect right now the answer to this question is no.  Plus you really need to account for college expenses in there somewhere, depending on your plans for that.

Another option is that most term policies let you drop your coverage amount one time during the term.  So you could consider lowering but not dropping the life insurance, depending on what you assess you need.

moonpalace

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Re: Should I drop term life insurance?
« Reply #7 on: September 03, 2019, 05:34:56 PM »
Excellent advice all around - thanks, everyone! I'll keep the policies for a couple/few more years. They do allow us to lower benefits at some point during the terms.

Loan payments are somewhat high because original balances were much higher (80k?); they'll be paid off in about 4 years.