Author Topic: Life Insurance, huh, what is it goo-od for?  (Read 4807 times)

Heckler

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Life Insurance, huh, what is it goo-od for?
« on: May 25, 2015, 12:11:00 AM »
Us- 40 yo, married 18 years, one cat, no kids or other dependants.  Both working full time professionals.  Parents and siblings are all in seemingly good financial shape.

House will be paid for January 2016 and since discovering MMM we have increased TFSA/RRSP investment rate to 30%, with a plan to jump it to 70-80% next year.  NW currently just shy of $800k, including house estimated value.



So, a year ago, my employer sponsored financial advisor (from Big Canadian Investment & Insurance co) did up a plan for us that's since gone out the window into Canadian Couch Potato, v 2014 with 20% bond allocation.  He noted our financial situation looks like the savers from post depression era, and was quite impressed, telling us we need to spend more. He pointed out two major holes - lack of a will and lack of life, disability, (etc,etc,) insurance.  We both have employer sponsored insurance plans that I really know nothing about, but I think it covers travel, short & long term disability and life but to a minimum value, more than enough in my mind. 

In our situation ( no dependants, house paid for, and you can spread our ashes in the ocean...), do MMM's see any good reason to pay for life insurance?  I expect there will be a few thousand left over to cremate us both, so why the hell should I finance the giant life insurance co?

mxt0133

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #1 on: May 25, 2015, 12:33:00 AM »
Based on your situation where if one of you pass the other will be able to continue their current lifestyle with little financial hardship, the only reason that the advisor recommended life insurance is to get the commission.  Disability one can argue for either way, because if you become disabled then you will need assets to support your lifestyle if you cannot work, but depending on where you life your government disability benefits might be enough.

I would get on the will, health care directives, and power of attorney.  Don't only focus on either of you passing but also you not being able to mentally make sound decisions for yourself.

seattlecyclone

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #2 on: May 25, 2015, 12:33:44 AM »
The fact that you both work and have a good chunk of savings indicates you don't desperately need life insurance, that's for sure. If you or your spouse died, how would that affect the survivor's retirement date? Would it add some years? Are you willing to take that risk? If so, go ahead and skip the insurance.

forummm

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #3 on: May 25, 2015, 06:57:48 AM »
We have less money than you and do not have life insurance because our future kids would already be richer than they need to be to get through their young lives. Being a kid just isn't that expensive. And if one of us died, the other would be just fine with their current job and still closing in rapidly on FIRE. Why waste the premiums?

Gray Matter

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #4 on: May 25, 2015, 07:42:00 AM »
No point in life insurance in your situation.  In our case (3 kids), we've got enough life insurance to pay off the house so we wouldn't have to move, and fund their education at a state school.  We bought 20-year-term insurance and once it runs out, we'll let it lapse because two of the kids will be in college and we won't need it.  Either one of us can support ourselves and/or live simply off the money we've already saved.

KungfuRabbit

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #5 on: May 25, 2015, 08:26:17 AM »
We have a ~half million $$ life insurance policy for now, like others said just to pay off the house and such so the survivor won't have to have a super tight budget until its paid off.  Once it's paid for that and we have a sizable stash, get rid of it.

Financial.Velociraptor

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #6 on: May 25, 2015, 09:06:14 AM »
Heckler,

Employer (free) provided life insurance is customarily coverage equal to 1x your annual salary, before bonus, options, perqs.  More than enough in your case to cover burial and provide a nice emergency fund to supplement the reduced forward single earner income.  I'd recommend a few hundred thousand per child if you had them.  Otherwise, your only need would be to extinguish a mortgage and you already have that covered.

I'm a no life insurance carrier myself.  I am considering a long term case policy though.  Obamacare could be leaving a big gap for me if I ever become debilitated and need permanent nursing home care.

Retire-Canada

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #7 on: May 25, 2015, 09:17:12 AM »

In our situation ( no dependants, house paid for, and you can spread our ashes in the ocean...), do MMM's see any good reason to pay for life insurance?  I expect there will be a few thousand left over to cremate us both, so why the hell should I finance the giant life insurance co?

Nope. No reason for life insurance.

If me or the GF died the other party would be set to FIRE. Double the assets for 1 person.

It sounds like you would be in a similar boat.

I've never had disability insurance. One of my good friends swears by it. I don't see  a problem with either approach as long as you understand the pros/cons.

-- Vik

Indexer

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #8 on: May 25, 2015, 10:47:57 AM »
If you don't have debts or dependents and you have basic life and disability at work you should be fine.

If you want a figure it all out here are some basics.

1. Bare Minimum:  You should have enough life insurance to cover any joint debts that would remain for your spouse + the cost of burial.   
2. Next step:  Are there any major recurring expenses that you currently help pay that aren't debts?   Example:  Rent.  You might want enough life insurance to cover these temporarily.
3. If you want to be generous to your children: You might want enough insurance to also cover their college. 
4. If you work and your spouse doesn't then you might want to consider enough insurance to cover some income replacement.


Insurance agents want you to believe you need 1-4, especially 4(even if your spouse works) because adding 4 will turn a 100k insurance need into a 2 million dollar insurance need.  If 1&2 are taken care of(sounds like they are) and you don't need 3 right now then your insurance need is $0.

Disability insurance.  Figure out what your company's' plan covers.  It likely covers at least 60% of your current income, many do.  If you are living on less than 60% of your income now then you don't need any more than that.

The FA likely just wanted a fat commission.  That is why he told you that you needed all that insurance.

forummm

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #9 on: May 25, 2015, 11:13:10 AM »
Weirdly, when you talk to people who sell stuff, they tell you that you should buy their product.

Wolf359

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #10 on: May 26, 2015, 10:12:04 AM »
To a hammer, all problems look like nails.

It's possible MMM does not fit into his world view.  He cannot conceive of someone who doesn't need life or disability insurance. 

You could fit your situation into insurance terms by indicating that your assets and income are such that you have self-insured and have accepted the income loss and disability risks.  However, it is pointless to do so.  You don't need the validation of a salesman to tell you that you're on the right track. 

Indexer is right on in terms of when you need insurance.  (None seem to apply here.)

thd7t

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Re: Life Insurance, huh, what is it goo-od for?
« Reply #11 on: May 26, 2015, 02:44:53 PM »
My wife and I keep life insurance, because although we could live on one income, there is a serious time premium on being a single parent.  If that were to happen, it would call for some help.  Forummm is correct saying that children aren't expensive, inherently, but if a parent has to work full time, their cost goes up quickly.  Mostly, we take the same position as Gray Matter.