Do I need life insurance?

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Trying2learn
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Do I need life insurance?

Post by Trying2learn »

I have a $1m 20-year term policy. I have a spouse and a baby, planning to have another soon. I got this policy last year and the policy should last until the unborn child is close to 18 years old. However, our net worth grew close to $1m unexpectedly in the past year so I no longer feel I need this policy. My spouse says to keep it another year in case of complications during pregnancy. The annual premium is $680. Worth it?
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Stinky
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Re: Do I need life insurance?

Post by Stinky »

If you were to die tomorrow, would your spouse have the funds (or other income) to go on with her life, including providing for your child, until college is complete? In other word, adequate funds to take your spouse to about 2040.

If you have the funds accumulated to do that, you don’t need life insurance. If you don’t have the funds, you need life insurance.

TIP - most folks who have an infant and are hoping for another need life insurance.
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BruDude
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Re: Do I need life insurance?

Post by BruDude »

Is the peace of mind worth $680? Probably. $1M doesn't go that far in raising two kids if your spouse doesn't have any other income. $2M gets the job done.
reln
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Re: Do I need life insurance?

Post by reln »

Trying2learn wrote: Thu Jun 04, 2020 9:11 pm I have a $1m 20-year term policy. I have a spouse and a baby, planning to have another soon. I got this policy last year and the policy should last until the unborn child is close to 18 years old. However, our net worth grew close to $1m unexpectedly in the past year so I no longer feel I need this policy. My spouse says to keep it another year in case of complications during pregnancy. The annual premium is $680. Worth it?
I would keep it.
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eye.surgeon
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Re: Do I need life insurance?

Post by eye.surgeon »

Definitely keep it. $1m may sound like a lot until you consider it's a mediocre house in some parts of the country or a couple ivy league educations. Either of which would leave your survivors eating crackers.
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WarAdmiral
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Re: Do I need life insurance?

Post by WarAdmiral »

Is your spouse also working ? We both have Life Insurance through work and feel that it is adequate. Of course the downside is that here would be loss of coverage if one of us became unemployed. Also, check your SS statement, your spouse/children may be eligible for monthly support in case of your death.
BruDude
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Re: Do I need life insurance?

Post by BruDude »

WarAdmiral wrote: Thu Jun 04, 2020 9:38 pm Is your spouse also working ? We both have Life Insurance through work and feel that it is adequate. Of course the downside is that here would be loss of coverage if one of us became unemployed. Also, check your SS statement, your spouse/children may be eligible for monthly support in case of your death.
I would highly recommend buying your own policy instead of relying on group coverage.
jimmy2040
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Re: Do I need life insurance?

Post by jimmy2040 »

You should keep it.

If I had 2 kids, I would probably up the life insurance to $1.5mil.
Grt2bOutdoors
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Re: Do I need life insurance?

Post by Grt2bOutdoors »

Trying2learn wrote: Thu Jun 04, 2020 9:11 pm I have a $1m 20-year term policy. I have a spouse and a baby, planning to have another soon. I got this policy last year and the policy should last until the unborn child is close to 18 years old. However, our net worth grew close to $1m unexpectedly in the past year so I no longer feel I need this policy. My spouse says to keep it another year in case of complications during pregnancy. The annual premium is $680. Worth it?
Keep it! Listen to your spouse. Net worth’s come and go, unless you are holding $1 mm in cash or guaranteed funds. Are you?
Ironic - “you don’t feel the need to keep it”, but let’s look at it from the other point of view - you’ll be dead and those left behind are the ones who are left “feeling”. Besides grief, perhaps depression or the burden of paying bills, two kids, etc. You should instead “feel” - I’m so glad my wife and kids are able to have a safe secure place to live, food on the table, clothes, be able to keep the same standard of living. $680 is a cheap price to pay for that feeling.
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Re: Do I need life insurance?

Post by Sandtrap »

1 year and $680 is worth your spouse’s peace of mind.
Evaluate after one year.
Listen to spouse.
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Oilcans
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Re: Do I need life insurance?

Post by Oilcans »

$1.86 per day won't even buy you a cup of coffee at Starbucks. Keep it.
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Trying2learn
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Re: Do I need life insurance?

Post by Trying2learn »

I have to say, I’m surprised at the responses. My spouse named $1m as what he felt would give him peace of mind so that’s what I purchased last year. But if we just pocketed ~$1m in the last year, doesn’t that defeat the purpose?

My salary is the lower of the two. Either of our incomes can support our household. It wouldn’t be as lavish but it would still be more than enough.

I get the point of keeping for peace of mind, though.
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BL
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Re: Do I need life insurance?

Post by BL »

Does your spouse have more or similar term insurance (not at work)? Have you checked around for current prices of similar term? I think at least a quick look at term4sale.com (and/or Zander is another I have heard of), to see if what you have is competitive in price. I see rates for a 30 yr old in my state between 400 and 500+, but I don't know your details to get it right. I am wondering if you bought from a salesman that checked several companies or if you looked at only one company.

You might have to wait to apply for same or lower insurance amounts until after baby is born. It wasn't clear to me that you were the one having the baby! I would keep the insurance at least until the child is born and determined to be healthy.

Is the new million saved/invested for long term or are you spending from it?
Valuethinker
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Re: Do I need life insurance?

Post by Valuethinker »

Trying2learn wrote: Thu Jun 04, 2020 11:45 pm I have to say, I’m surprised at the responses. My spouse named $1m as what he felt would give him peace of mind so that’s what I purchased last year. But if we just pocketed ~$1m in the last year, doesn’t that defeat the purpose?

My salary is the lower of the two. Either of our incomes can support our household. It wouldn’t be as lavish but it would still be more than enough.

I get the point of keeping for peace of mind, though.
I would hold onto it.

If one of you was not around, the other might find it hard to hold onto a career (at the same level) and be a lone parent.

There's a lot that can go wrong in the world (like a terminal illness with accompanying medical bills).

If you do decide to get a cheaper term life policy, then be careful re exclusion periods. I believe these are legally set (by state) and for which causes of of death. You want to hold on to your existing policy (which would have passed out of these periods) until the exclusion periods have passed for new policies. You don't want some fancy insurance lawyer to argue your beneficiaries out of a $1m payout - they might argue your car accident was actually a suicide, etc. Or that you must have known about that cancer when you took out the policy, etc.
Valuethinker
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Re: Do I need life insurance?

Post by Valuethinker »

BruDude wrote: Thu Jun 04, 2020 9:40 pm
WarAdmiral wrote: Thu Jun 04, 2020 9:38 pm Is your spouse also working ? We both have Life Insurance through work and feel that it is adequate. Of course the downside is that here would be loss of coverage if one of us became unemployed. Also, check your SS statement, your spouse/children may be eligible for monthly support in case of your death.
I would highly recommend buying your own policy instead of relying on group coverage.
My first job was in IT for a Group Life & Health insurer.

Definitely Group Coverage is much weaker than individual coverage. Its main advantage is if you would have a "rated" policy (I think that is the term) as an individual - i.e. much higher premium (on uninsurable) because you had had e.g. cancer. It is in no way a substitute for personal term life.

And of course you lose it if you lose your job.

Term life just gets steadily more expensive as you get older. Which is why one should buy it when one is young (and healthy).
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Stinky
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Re: Do I need life insurance?

Post by Stinky »

Trying2learn wrote: Thu Jun 04, 2020 11:45 pm My salary is the lower of the two. Either of our incomes can support our household. It wouldn’t be as lavish but it would still be more than enough.
Your post answered a key question. “Is someone depending on your continuing income for their support?” It sounds like the answer for you is “no”, since either of your salaries can support the household. Under that definition, and presuming that your spouse would continue working at the same level after your death, you wouldn’t need life insurance.

However, there is much to be said for the peace of mind from having life insurance. And term life insurance such as you have is dirt cheap.
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FreemanB
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Re: Do I need life insurance?

Post by FreemanB »

Trying2learn wrote: Thu Jun 04, 2020 11:45 pm My salary is the lower of the two. Either of our incomes can support our household. It wouldn’t be as lavish but it would still be more than enough.
There's also a difference between only needing one income to support the household and being able to maintain the same lifestyle should one of you die unexpectedly. My wife and I are in a similar situation, where we have comparable incomes and net worth currently, and we could get by with just one if necessary. However, the remaining spouse's lifestyle would be very different if that happened. No more expensive vacations or other luxuries that we enjoy, and likely a lot more stress when it comes to money overall. Insurance provides some financial buffer to minimize the impact, and also adds the flexibility to adjust and adapt as needed to deal with the death of a spouse. $1M net worth may seem like a lot, but it isn't nearly enough to give me peace of mind now.
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Trying2learn
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Re: Do I need life insurance?

Post by Trying2learn »

My spouse does not have insurance outside his employment. We considered it when I was first pregnant but given a health condition (that is well-controlled) his premiums didn't seem worth it. But now, I don't think he needs to be insured. If he were to pass, my math tells me I would be OK even with two kids; my options would be 1) not work one more day but would need to move to a lower COLA or 2) stay and work at least part-time, both are fine with me and I like working.

Unfortunately, my premium is higher due to one close family member developing a health condition (who is now 70+ but I digress). I went through Zander.

Most of the new million went towards our family home, with some left over. We were in the market, put in an offer on a house, never asked for a cent and bam, gifted the money and it became a cash deal so no mortgage. Our existing funds, plus the leftover, is invested for long term savings. The grandparents also set up a trust for our child (plus any additional children we may have). We are now in a great spot. I manage the finances and DH's default is usually to do nothing, but I also understand the 'peace of mind' factor, but at $680 x 18 more years?

BL wrote: Fri Jun 05, 2020 12:52 am Does your spouse have more or similar term insurance (not at work)? Have you checked around for current prices of similar term? I think at least a quick look at term4sale.com (and/or Zander is another I have heard of), to see if what you have is competitive in price. I see rates for a 30 yr old in my state between 400 and 500+, but I don't know your details to get it right. I am wondering if you bought from a salesman that checked several companies or if you looked at only one company.

You might have to wait to apply for same or lower insurance amounts until after baby is born. It wasn't clear to me that you were the one having the baby! I would keep the insurance at least until the child is born and determined to be healthy.

Is the new million saved/invested for long term or are you spending from it?
sd323232
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Re: Do I need life insurance?

Post by sd323232 »

Trying2learn wrote: Thu Jun 04, 2020 9:11 pm I have a $1m 20-year term policy. I have a spouse and a baby, planning to have another soon. I got this policy last year and the policy should last until the unborn child is close to 18 years old. However, our net worth grew close to $1m unexpectedly in the past year so I no longer feel I need this policy. My spouse says to keep it another year in case of complications during pregnancy. The annual premium is $680. Worth it?
Keep paying. Total cost for 20 years you will pay 13,600. God forbid shall you pass, your family will get 1 mil. It is good deal to keep this life insurance. Keep paying, you got a good deal.
johnny
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Re: Do I need life insurance?

Post by johnny »

+1 on keep the term. Your rates are favorable now. It may not always be so. As others have mentioned, the amount is not over the top. In fact the only thing you can guarantee is that your situation will change.
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ICMoney
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Re: Do I need life insurance?

Post by ICMoney »

Trying2learn wrote: Fri Jun 05, 2020 1:32 pm My spouse does not have insurance outside his employment. We considered it when I was first pregnant but given a health condition (that is well-controlled) his premiums didn't seem worth it. But now, I don't think he needs to be insured. If he were to pass, my math tells me I would be OK even with two kids; my options would be 1) not work one more day but would need to move to a lower COLA or 2) stay and work at least part-time, both are fine with me and I like working.

Unfortunately, my premium is higher due to one close family member developing a health condition (who is now 70+ but I digress). I went through Zander.

Most of the new million went towards our family home, with some left over. We were in the market, put in an offer on a house, never asked for a cent and bam, gifted the money and it became a cash deal so no mortgage. Our existing funds, plus the leftover, is invested for long term savings. The grandparents also set up a trust for our child (plus any additional children we may have). We are now in a great spot. I manage the finances and DH's default is usually to do nothing, but I also understand the 'peace of mind' factor, but at $680 x 18 more years?
I would keep the policy. It sounds like your spouse isn't comfortable with a $1M net worth and two young kids to raise if you were to die, so this extra $1M from the term policy would help and I agree with him. That is several years of health insurance, childcare, bills, college, etc. that your spouse alone would be responsible for. I would not be as comfortable with dropping this coverage as you seem to be.

I would also strongly encourage your spouse to get individual level term insurance outside of his work. Yes, the premiums may seem expensive but it would be peace of mind for me as a mom to know that if he were to die young I would be able to afford health insurance, college, etc for my young kids.

Best, ICM
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wander
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Re: Do I need life insurance?

Post by wander »

Either you or your spouse can support your family easily. However, if anything happens to you or your spouse, with insurance, you have options to stay home full time taking care of your children or continue working. I think I prefer options.

The tasks of taking care the kids increase to tripple or more than when a spouse is still around.
PowderDay9
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Re: Do I need life insurance?

Post by PowderDay9 »

Have you looked into a 10 year policy? Sounds like you may not need the policy after 5-10 years. With the 20 year level term you are overpaying now to underpay later in the policy. You might be able to save a lot by a shorter term. Peace of mind is important because financial and health situations can change.
knightrider
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Re: Do I need life insurance?

Post by knightrider »

$680/year seems a lot to me . It sounds like you are on the road to financial independence. No reason to complicate your life with life insurance. Life is short and you can't spend all your time and money planning for every worse-case scenario..
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greg24
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Re: Do I need life insurance?

Post by greg24 »

Trying2learn wrote: Fri Jun 05, 2020 1:32 pmbut at $680 x 18 more years?
I wouldn't view it as "18 more years". Take it a year at a time. Maybe your net worth continues to climb and you find it easy to drop the policy.

Maybe your personal status changes (job loss, financial catastrophe, stuff just happens), and you'll be happy to have the policy.
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Re: Do I need life insurance?

Post by Grt2bOutdoors »

knightrider wrote: Fri Jun 05, 2020 8:44 pm $680/year seems a lot to me . It sounds like you are on the road to financial independence. No reason to complicate your life with life insurance. Life is short and you can't spend all your time and money planning for every worse-case scenario..
You're right! :oops: Let the young kids fend for themselves, after all $680 is waay too much money to spend on them! :twisted:
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runner540
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Re: Do I need life insurance?

Post by runner540 »

Trying2learn wrote: Fri Jun 05, 2020 1:32 pm My spouse does not have insurance outside his employment. We considered it when I was first pregnant but given a health condition (that is well-controlled) his premiums didn't seem worth it. But now, I don't think he needs to be insured. If he were to pass, my math tells me I would be OK even with two kids; my options would be 1) not work one more day but would need to move to a lower COLA or 2) stay and work at least part-time, both are fine with me and I like working.

Unfortunately, my premium is higher due to one close family member developing a health condition (who is now 70+ but I digress). I went through Zander.

Most of the new million went towards our family home, with some left over. We were in the market, put in an offer on a house, never asked for a cent and bam, gifted the money and it became a cash deal so no mortgage. Our existing funds, plus the leftover, is invested for long term savings. The grandparents also set up a trust for our child (plus any additional children we may have). We are now in a great spot. I manage the finances and DH's default is usually to do nothing, but I also understand the 'peace of mind' factor, but at $680 x 18 more years?

BL wrote: Fri Jun 05, 2020 12:52 am Does your spouse have more or similar term insurance (not at work)? Have you checked around for current prices of similar term? I think at least a quick look at term4sale.com (and/or Zander is another I have heard of), to see if what you have is competitive in price. I see rates for a 30 yr old in my state between 400 and 500+, but I don't know your details to get it right. I am wondering if you bought from a salesman that checked several companies or if you looked at only one company.

You might have to wait to apply for same or lower insurance amounts until after baby is born. It wasn't clear to me that you were the one having the baby! I would keep the insurance at least until the child is born and determined to be healthy.

Is the new million saved/invested for long term or are you spending from it?
Keep the insurance policy. Having most of your net worth tied up in a house is not the same as $1MM in an account. If you have a house in that ballpark and two salaries, either of which could support the family, you can afford the $57/month. Re evaluate in a few years.
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Re: Do I need life insurance?

Post by inbox788 »

BL wrote: Fri Jun 05, 2020 12:52 am Does your spouse have more or similar term insurance (not at work)? Have you checked around for current prices of similar term? I think at least a quick look at term4sale.com (and/or Zander is another I have heard of), to see if what you have is competitive in price. I see rates for a 30 yr old in my state between 400 and 500+, but I don't know your details to get it right. I am wondering if you bought from a salesman that checked several companies or if you looked at only one company.

You might have to wait to apply for same or lower insurance amounts until after baby is born. It wasn't clear to me that you were the one having the baby! I would keep the insurance at least until the child is born and determined to be healthy.

Is the new million saved/invested for long term or are you spending from it?
I'm guessing OP is a little older, maybe closer to 45 gives an annual premium nearly $1000.

I'm usually against overinsuring, but sounds like you need some and the policy seems about right, and you can easily afford it. You can shop around and tinker with your needs, or just bite the bullet and pay less than $14k for the next 19 years and not worry about it. As your net worth grows and your liabilities decrease (kids grow up and go off to college), it becomes even more affordable. And while you might not need years 19 or 20, those are the best value years where the odds might favor you (even though you still don't want to "win").
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