I would look at this in the context of your financial plan. If you need, say, $500,000, for how long will you need it before your stash grows to the point where you are effectively self-insured? Then buy the term to match that, with some safety margin if it makes you feel better. Shortening the term of your policy would likely drop the premium.
Is this the whole 4 percent thing? Sorry, I'm still really new.. I don't have a "financial plan" in order yet.. I hate to ask you stupid questions, can you maybe point me in a direction to start reading?
You're not asking stupid questions. Based on your posts, I think you're already on to what I'm talking about. If you plan on building up your savings, eventually you won't need the insurance payout if something bad happens. So the question is, how long until your savings get to that point? For most mustachians, that will be less than 30 years, but it will be different for everyone. Tough to know without your own financial plan, however.
When my wife and I bought policies, we decided that if one of us kicked the bucket in the next couple years, we would need $1 million to "replace" the other person's contribution in terms of child care, lost income etc. This was pre-mustache and had a lot of safety margin built in even at that time. However, we considered things like:
-likely rent/mortgage in our current area (high COL).
-cost of "replacement workers" to fill functions of missing parent.
-need to reduce income generating activities to spend more time with children.
-potential need of surviving spouse to take time off or go to therapy to deal with loss (we like each other quite a bit).
The amount we ultimately settled on was the one that let us sleep at night. The numbers helped, but it also just felt right. We did not consider the 4% rule, because the life insurance policies were not bought with the mindset that the surviving spouse would be able to retire on the proceeds. I can see how others would, however.
