Author Topic: When did you decide to drop life insurance?  (Read 2532 times)

HeadedWest2029

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When did you decide to drop life insurance?
« on: January 09, 2017, 11:56:26 AM »
My wife signed up for whole life insurance when she was pretty young ($50k benefit + cash value).  I have term life insurance through work, which I intend to keep ($50k)
My wife has a small business out of the home that generates modest income, so in the event of her death, financially it wouldn't be a hardship.
I suppose the bigger issue would be if our son became orphaned because we both died in a car accident of something.  The monthly premium is only $23.50 per month (locked in), so not a lot of money.  However, I just stare at this recurring expense and ask if this is just waste.  We have ~$350k in all investments (529, ROTHs, 403b, Traditional IRAs, P2P, brokerage), a paid off house, and a 3 month cash buffer.  I think the only thing that keeps me from cashing out is not wanting to be an ass to our son's caregiver should we pass.  Once I ran the numbers on the rate of return with dividends on the insurance plan and it wasn't awful, but I'm sure I could do better obviously with a simple index fund, plus recurring bills are dumb.  FWIW we have a will / estate planning all spelled out from a lawyer. 

* I'm aware that many prefer term vs whole life insurance.  If I had a time machine I would have yelled "noooooooo..." to my future wife

Mgmny

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Re: When did you decide to drop life insurance?
« Reply #1 on: January 09, 2017, 12:17:55 PM »
My wife signed up for whole life insurance when she was pretty young ($50k benefit + cash value).  I have term life insurance through work, which I intend to keep ($50k)
My wife has a small business out of the home that generates modest income, so in the event of her death, financially it wouldn't be a hardship.
I suppose the bigger issue would be if our son became orphaned because we both died in a car accident of something.  The monthly premium is only $23.50 per month (locked in), so not a lot of money.  However, I just stare at this recurring expense and ask if this is just waste.  We have ~$350k in all investments (529, ROTHs, 403b, Traditional IRAs, P2P, brokerage), a paid off house, and a 3 month cash buffer.  I think the only thing that keeps me from cashing out is not wanting to be an ass to our son's caregiver should we pass.  Once I ran the numbers on the rate of return with dividends on the insurance plan and it wasn't awful, but I'm sure I could do better obviously with a simple index fund, plus recurring bills are dumb.  FWIW we have a will / estate planning all spelled out from a lawyer. 

* I'm aware that many prefer term vs whole life insurance.  If I had a time machine I would have yelled "noooooooo..." to my future wife

Cancel it. You literally do not need it.

Your house is paid off, and you're leaving your son with $350k in assets (plus whatever your house is worth). I'm not an attorney, but I am 95% certain that in your will you can redirect some of those funds to his caretakers (you may need to will the setup of a trust in the event of your death), and your son will be MORE than taken care of.

Also, not to be weird, but if you're dead, who cares if your son's caretakers get money? Do you know who they would be (sister/brother/parents/cousin?) You could just plainly ask them if they need money to watch your kid if you both die. If my brother died, and he left me his child, I wouldn't expect my dead brother to keep paying for his kid, and I wouldn't think he was an ass if he didn't pay me. Plus, your kid will be SET if you and your wife die - assuming your house is worth at least 150k, your son will inherit half a million dollars. You have literally nothing to worry about.

HeadedWest2029

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Re: When did you decide to drop life insurance?
« Reply #2 on: January 09, 2017, 12:53:03 PM »
Do you know who they would be (sister/brother/parents/cousin?)

Yeah, it would be a family member who sucks at money management (heart of gold, loves our kid, clueless with finances), so our assets would be put into a trust.  BUT, there are provisions to help reduce burden on her, for instance living in our paid off house and having child expense paid out of the trust.  I think the average cost of raising a kid til 18 is like $300k nowadays so I think we have it fairly covered.  Just hate the idea of putting any extra financial burden on family.

ltt

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Re: When did you decide to drop life insurance?
« Reply #3 on: January 09, 2017, 02:57:38 PM »
Is your child a toddler or older and working part-time?
« Last Edit: January 09, 2017, 02:59:22 PM by ltt »

HeadedWest2029

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Re: When did you decide to drop life insurance?
« Reply #4 on: January 09, 2017, 03:02:25 PM »
6 y/o. High time he gets a job...lazy bum
« Last Edit: January 09, 2017, 03:07:18 PM by FourPercenter »

SimpleCycle

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Re: When did you decide to drop life insurance?
« Reply #5 on: January 09, 2017, 03:28:38 PM »
I'm pretty new around here and I suspect my answer goes against the orthodoxy, but I would honestly not be comfortable at all with that level of life insurance with a small child.  We purchased enough life insurance to take care of all our children's needs until they are graduated from college.  I wouldn't feel comfortable asking our chosen guardians to take on the financial burden of raising my child in addition to the logistical and emotional burdens.

That said, the whole life insurance is a terrible deal.  My wife has a term policy of $1M for $36/month.  My premiums are more because I have health conditions, and I still won't drop it anytime soon.

nereo

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Re: When did you decide to drop life insurance?
« Reply #6 on: January 09, 2017, 03:43:44 PM »
Do you know who they would be (sister/brother/parents/cousin?)

Yeah, it would be a family member who sucks at money management (heart of gold, loves our kid, clueless with finances), so our assets would be put into a trust.  BUT, there are provisions to help reduce burden on her, for instance living in our paid off house and having child expense paid out of the trust.  I think the average cost of raising a kid til 18 is like $300k nowadays so I think we have it fairly covered.  Just hate the idea of putting any extra financial burden on family.

I think you've answered your own question.  In the (very) unlikely event that both of you will die, you already have sufficient assets to provide for your child into adulthood. 

First, remember that $300k is a McSpendypants average
Second, your child is already 6 - besides college the 0-2 years are the most expensive.
Third - as others have said there's no reason to expect that your future caregiver would need you to support him beyond the grave.  When you adopt a child you adopt the fiscal responsibility that comes with it.

Cancel the life insurance.  Make sure you draft a will with a clear trust that can provide some level of child support while retaining some for an inheretance and/or college expenses (as you see fit). I'd say that $2,000/mo is MORE than ample support, and leaves your son with $110k + the value of your home to pay for college.  If it were me I'd probably leave something closer to $1k/mo in support.

Mgmny

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Re: When did you decide to drop life insurance?
« Reply #7 on: January 10, 2017, 12:40:52 AM »
Do you know who they would be (sister/brother/parents/cousin?)

Yeah, it would be a family member who sucks at money management (heart of gold, loves our kid, clueless with finances), so our assets would be put into a trust.  BUT, there are provisions to help reduce burden on her, for instance living in our paid off house and having child expense paid out of the trust.  I think the average cost of raising a kid til 18 is like $300k nowadays so I think we have it fairly covered.  Just hate the idea of putting any extra financial burden on family.

I think you've answered your own question.  In the (very) unlikely event that both of you will die, you already have sufficient assets to provide for your child into adulthood. 

First, remember that $300k is a McSpendypants average
Second, your child is already 6 - besides college the 0-2 years are the most expensive.
Third - as others have said there's no reason to expect that your future caregiver would need you to support him beyond the grave.  When you adopt a child you adopt the fiscal responsibility that comes with it.

Cancel the life insurance.  Make sure you draft a will with a clear trust that can provide some level of child support while retaining some for an inheretance and/or college expenses (as you see fit). I'd say that $2,000/mo is MORE than ample support, and leaves your son with $110k + the value of your home to pay for college.  If it were me I'd probably leave something  closer to $1k/mo in support.

This exactly. No one needs 2k a month to raise a kid from 6 to 18. Plus, you likely aren't going to die anyways, AND you're even less likely to die today, so you and your wife could die in your car crash in 10 years when your kid is 16, and your stash would be even bigger.

I'd have stopped this awhile ago.

MayDay

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Re: When did you decide to drop life insurance?
« Reply #8 on: January 10, 2017, 06:02:45 AM »
Your kid would get 1-2k a month in social security if you both die.

That is 120k right there, minimum.

Cancel.

We have two kids, no house, 500k net worth and just carry the 1x annual salary term that my H gets from work. SS will cover a big chunk if we die, our net worth will easily cover the rest.

Neustache

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Re: When did you decide to drop life insurance?
« Reply #9 on: January 10, 2017, 06:28:26 AM »
I always forget about SS survivor benefits.  Thanks for bringing it up, MayDay!

HeadedWest2029

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Re: When did you decide to drop life insurance?
« Reply #10 on: January 10, 2017, 08:03:28 AM »
Your kid would get 1-2k a month in social security if you both die.

That is 120k right there, minimum.

Cancel.

We have two kids, no house, 500k net worth and just carry the 1x annual salary term that my H gets from work. SS will cover a big chunk if we die, our net worth will easily cover the rest.

Oh man, I forgot about that extra safety net.  Good point!