Should I Cancel Husband's Term Insurance?

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virginiabirdie
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Should I Cancel Husband's Term Insurance?

Post by virginiabirdie »

When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
inverter
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Re: Should I Cancel Husband's Term Insurance?

Post by inverter »

Probably have, or do have enough? Would wait until it's the latter.
Trader Joe
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Re: Should I Cancel Husband's Term Insurance?

Post by Trader Joe »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
We did the same. Good move.
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Re: Should I Cancel Husband's Term Insurance?

Post by sailaway »

So, could you cancel the insurance and retire now?
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Stinky
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Re: Should I Cancel Husband's Term Insurance?

Post by Stinky »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Tell us more.

How many years ago did you buy it? What was your rationale for picking $3 million as the coverage amount? What is the level term period?

What has changed in your financial life since you purchased the policy to make you consider lapsing the policy now?

And what does your husband think of canceling the policy on his life?
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Raymond
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Re: Should I Cancel Husband's Term Insurance?

Post by Raymond »

What does "...probably have enough..." mean?

Have you run the numbers?

How old are the kids?

What percentage of your annual net income is $2400?

What does your husband think about cancelling the insurance?

Edit: Stinky asked some of the same questions already :happy
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Normchad
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Re: Should I Cancel Husband's Term Insurance?

Post by Normchad »

If your husband dies, will you be okay financially?

Will the kids be able to get the education you are planning for them?

Will you be able to support yourself? Will you be able to retire some day?
RudyS
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Re: Should I Cancel Husband's Term Insurance?

Post by RudyS »

We made this decision to cancel term insurance once we concluded we didn't need it, and sent the equivalent of the premium to a mutual fund, approx. 35 years ago! Really glad we did it! Actually it was excess coverage from my employer over the regular amount. Amazing what $200 per month turned into!
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Re: Should I Cancel Husband's Term Insurance?

Post by mega317 »

If you've accumulated enough by ~40 to no longer need a 3MM policy then $200/mo isn't that big a deal to you, and I'd keep it until you are absolutely certain you don't need it. Like so certain that you don't put the word "probably" in your post, and in fact you don't even post at all because you don't need any help with the decision.
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Bobby206
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Re: Should I Cancel Husband's Term Insurance?

Post by Bobby206 »

I'd drop it to $1mi. There is nothing like money if someone dies unexpectedly. Doesn't solve all problems but helps.
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augryphon
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Re: Should I Cancel Husband's Term Insurance?

Post by augryphon »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Thinking “We probably have enough” is foolish. When you can say with certainty that you have enough, then you can consider cancellation. At 40ish, there are a lot of unknowns between you and retirement, and many risks that can’t be eliminated. $200 isn’t that much, especially if you can swing it.
Morgan Dollar 1921
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Re: Should I Cancel Husband's Term Insurance?

Post by Morgan Dollar 1921 »

Going from $3M to zero need for income replacement is hard for me to wrap my thoughts around. This might sound critical, but at some point $2.5M then $2.0M and lower should have been the plan. Especially if this is annual renewable term.

As others have stated, not enough info. Is he still earning the same amount of income when purchased? Or More? Less?

How long ago was this purchased?

Is he still in good health ? (I hope.)

Is this level term, thus you paid more in premiums in the early years to have a lower level term premium in the last half of the coverage term?
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Re: Should I Cancel Husband's Term Insurance?

Post by BruDude »

Agree with others that posted - if you aren't sure that you don't need it, then you probably need it. I would be especially hesitant to drop any life insurance policy until there is a vaccine for COVID. You can always look at the option of reducing the benefit amount to reduce the cost. I would say that if you have enough money to think you may not need it, then you can also easily afford the $200/month for peace of mind.
123
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Re: Should I Cancel Husband's Term Insurance?

Post by 123 »

The sure test is if you (both) could retire now (regardless of age) and be self-sufficient (including paying for children's education) based on your assets and pensions (including social security) than you don't need life insurance.
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shess
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Re: Should I Cancel Husband's Term Insurance?

Post by shess »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
You really need to sit down and think why you want the term life, what the point of it is. Then that answers the question. If you bought the policy because everyone says "You need term life insurance", then you need to develop these ideas before moving on.

Personally, I wouldn't look at things like covering college costs, I would look at things like how long you could remain in your current situation with no change (other than the obvious). People die ALL THE TIME without having arranged for their kids' college expenses, it's a fact of life. But if your college plan was "Pay for it from income" and your kid is in college or near college, that is hugely disruptive. Likewise with housing, people die, after awhile you move to a cheaper house or closer to relatives, etc. So you should definitely make sure you have a number of years to defer having to make tough decisions, but ... should the goal be to pay for staying in the same house with the same standard of living without the husband's income indefinitely? I dunno, maybe, maybe not, you do you.

I guess where I'm going is figure out the right amount, then figure out if the right solution is to cancel, or ask them to reduce your policy amount. And be REALLY liberal in calculating the costs of medical care, until you get to medicare age it's probably way more expensive than you think (I'm retired early and it's our biggest expense, bigger than property taxes).
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Re: Should I Cancel Husband's Term Insurance?

Post by MikeG62 »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
As others have said, the phrase "probably have" is vague. If it's not almost a certainty, you could consider lowering the coverage amount (to $2 million or $1 million) until you reach the point where you'd remove the word probably from the statement.

FWIW, I dropped my term life insurance policy when I turned 50 as rates increased substantially in that year. Could have dropped it years prior, but it was cheap and I just did not think much about it. General rule of thumb is you should have life insurance to the extent you are relying on the income producing capacity of the person insured. Once that is no longer the case, there is no "need" for life insurance.
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Ping Pong
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Re: Should I Cancel Husband's Term Insurance?

Post by Ping Pong »

What if he becomes disabled before he dies? Car accident, for example. You could spend a lot of money taking care of him, then when he dies you wouldn’t have enough money for yourself, even if you did have enough before he became disabled.
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Re: Should I Cancel Husband's Term Insurance?

Post by dknightd »

We dropped life insurance about 6 months before I retired. The assumption was we did not need it any more. We let the insurance amount decrease as our savings increased. If savings, plus insurance, was more than we needed we'd be OK. In retrospect we probably kept it longer than it was needed. But if one of us had died sooner I think we would have been glad to have it. No easy answer, except perhaps if you need term life insurance, you should probably not retire . . .
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Re: Should I Cancel Husband's Term Insurance?

Post by Admiral »

mega317 wrote: Sun Sep 06, 2020 9:54 pm If you've accumulated enough by ~40 to no longer need a 3MM policy then $200/mo isn't that big a deal to you, and I'd keep it until you are absolutely certain you don't need it. Like so certain that you don't put the word "probably" in your post, and in fact you don't even post at all because you don't need any help with the decision.
+1. If you're even contemplating that you no longer need it, then you've accumulated enough such that $200/mo is pocket change. If you have $5m in non retirement liquid assets, then get rid of it. If not, then keep it. But the point of insurance is income replacement. It's not only about liquid assets, it's about covering lost income so you don't NEED to live on your savings.
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Re: Should I Cancel Husband's Term Insurance?

Post by cabfranc »

This question is impossible to answer without knowing your financial situation. If your husband makes enough money to need a $3M life insurance policy, I'm not sure why you are itching to get rid of a $200/month expense. Late 30s/early 40s is young. I'd want to be sure I had a lot of money--not normal retirement amounts but enough to cover worst case scenarios over the next several decades. For example, I work with two people who have a child with special needs who developed the needs later in life--in one case as a young adult. The parents will need to leave money for them because they cannot fully support themselves.
Nowizard
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Re: Should I Cancel Husband's Term Insurance?

Post by Nowizard »

As worded, no. He should make that decision, or at least in discussion with you. However, if you are in excellent shape, the amount of cost is inconsequential. After all, insurance is something we hope to never use.

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Re: Should I Cancel Husband's Term Insurance?

Post by Jefferson »

mega317 wrote: Sun Sep 06, 2020 9:54 pm If you've accumulated enough by ~40 to no longer need a 3MM policy then $200/mo isn't that big a deal to you, and I'd keep it until you are absolutely certain you don't need it. Like so certain that you don't put the word "probably" in your post, and in fact you don't even post at all because you don't need any help with the decision.
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virginiabirdie
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Re: Should I Cancel Husband's Term Insurance?

Post by virginiabirdie »

Stinky wrote: Sun Sep 06, 2020 9:02 pm
virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Tell us more.

How many years ago did you buy it? What was your rationale for picking $3 million as the coverage amount? What is the level term period?

What has changed in your financial life since you purchased the policy to make you consider lapsing the policy now?

And what does your husband think of canceling the policy on his life?
Mea culpa. I wrote a lazy post.

My husband leaves the finances to me. I bought the policy maybe 8 years ago, so 22 years remain. $3 million seemed like a lucky number; really, it was as silly as that. I'm thinking of cancelling b/c it seems like we might not need it. That money could go into our retirement savings.

If my husband died, right now, I would have:

-300k in 529s for two kids
-2.5 million-ish in retirement/taxable accounts
-MINUS a 1.5 million dollar mortgage (of course, I would sell the house if something happened and move into a smaller place)

I will probably inherit high six/very low seven figures from my parents, but I don't count on it.

Reasons to cancel: I can put that money to work in my portfolio.

Reasons not to cancel: I'm thinking of having another child. Life is unpredictable--what if someone gets an illness that requires long-term care and it's just me? If my husband passes, I could keep our house and still sends the kids to private school (a necessity s we're in a HCOL area with expensive houses and subpar schools).
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Re: Should I Cancel Husband's Term Insurance?

Post by abuss368 »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
I just lowered our this weekend has the premium increases every 5 years. Since five years ago, the investments have grown and the debt has declined. The premium was estimated at $250 a month for us and we also have insurance through an employer plan.

I think decreasing the insurance over time is sound if assets increase and debt decreases. Everyone's situation is different however. In my opinion life insurance is critical during a certain period of time in most circumstances. I do not expect to have any in the next decade or so.
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Re: Should I Cancel Husband's Term Insurance?

Post by JoeRetire »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Once nobody is relying on your income any longer, there is no need for life insurance.

We cancelled ours in our early 50s. We were financially independent, kids living on their own. No need to throw money away.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Bobby206
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Re: Should I Cancel Husband's Term Insurance?

Post by Bobby206 »

virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm
Stinky wrote: Sun Sep 06, 2020 9:02 pm
virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Tell us more.

How many years ago did you buy it? What was your rationale for picking $3 million as the coverage amount? What is the level term period?

What has changed in your financial life since you purchased the policy to make you consider lapsing the policy now?

And what does your husband think of canceling the policy on his life?
Mea culpa. I wrote a lazy post.

My husband leaves the finances to me. I bought the policy maybe 8 years ago, so 22 years remain. $3 million seemed like a lucky number; really, it was as silly as that. I'm thinking of cancelling b/c it seems like we might not need it. That money could go into our retirement savings.

If my husband died, right now, I would have:

-300k in 529s for two kids
-2.5 million-ish in retirement/taxable accounts
-MINUS a 1.5 million dollar mortgage (of course, I would sell the house if something happened and move into a smaller place)

I will probably inherit high six/very low seven figures from my parents, but I don't count on it.

Reasons to cancel: I can put that money to work in my portfolio.

Reasons not to cancel: I'm thinking of having another child. Life is unpredictable--what if someone gets an illness that requires long-term care and it's just me? If my husband passes, I could keep our house and still sends the kids to private school (a necessity s we're in a HCOL area with expensive houses and subpar schools).
I'd keep it at $3m with this new info BUT look into a 10 or 20 year term. The rates should be less than a 30 year and you know you don't want another 22 years of those payments.
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Re: Should I Cancel Husband's Term Insurance?

Post by Golf maniac »

Only OP can answer after putting everything in writing. So, husband dies and no insurance. You sell house and move into smaller place. What does that net you? What will be your living expenses? Private schools? How long? Will your income support your lifestyle until you retire? How much of $2.5 million is taxable? How long do you want to work? What will be expenses after retirement? Will you move to LCOL or stay in HCOL after retirement? If retire before 65 what will you do for medical?

I think it would be foolish to drop insurance until all these and probably many more are answered. You may want to reduce the size of the policy, but you need to answer the questions and work the numbers.
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Re: Should I Cancel Husband's Term Insurance?

Post by mega317 »

I can't see how $2400 a year makes a difference. Your portfolio moves more than that every day in the market.
virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm Reasons not to cancel:
Until this paragraph is blank I just don't get it. OP you have a ton of money but also a big mortgage so actually not a very high net worth in proportion. You are the perfect candidate for life insurance!
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Re: Should I Cancel Husband's Term Insurance?

Post by sergeant »

A very quick and back of the envelope guesstimate says that you should obtain a million dollar, ten year term policy on your husband and then cancel the current policy. You know your situation better than anyone else though. What does your husband think?
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Re: Should I Cancel Husband's Term Insurance?

Post by Stinky »

virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm
My husband leaves the finances to me. I bought the policy maybe 8 years ago, so 22 years remain. $3 million seemed like a lucky number; really, it was as silly as that. I'm thinking of cancelling b/c it seems like we might not need it. That money could go into our retirement savings.

If my husband died, right now, I would have:

-300k in 529s for two kids
-2.5 million-ish in retirement/taxable accounts
-MINUS a 1.5 million dollar mortgage (of course, I would sell the house if something happened and move into a smaller place)

I will probably inherit high six/very low seven figures from my parents, but I don't count on it.

Reasons to cancel: I can put that money to work in my portfolio.

Reasons not to cancel: I'm thinking of having another child. Life is unpredictable--what if someone gets an illness that requires long-term care and it's just me? If my husband passes, I could keep our house and still sends the kids to private school (a necessity s we're in a HCOL area with expensive houses and subpar schools).
I still have some very basic questions:
—-Does your husband work? If so, how much does he earn? Is he the sole breadwinner? If not, how much do you make?

—-What is your monthly household budget?

—-If your husband died, would your children be eligible for survivor social security?

—-You have $2.5 million of assets right now. At a 3% withdrawal rate, that would produce about $75k per year. Is that enough for you to live on (plus SS and your income)?

If your husband is primary breadwinner, and if you’re looking to have another child, I think that the 22 years remaining on his current policy might be about right. That would take your new baby through college.

Maybe the $3 million is too high; maybe it’s too low; we won’t know until you provide more detail on income and expenses.
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Re: Should I Cancel Husband's Term Insurance?

Post by reln »

virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Yes you are being too cheap. Keep it.
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Re: Should I Cancel Husband's Term Insurance?

Post by theresearcher »

Have you calculated the present value of your husband's future income stream. That should be part of the reason for having life insurance.
Does he have any life insurance through his employment- although this may not be portable if he were to change jobs.
Have you evaluated how much life insurance cover should be held on your life. And other related insurance needs- illness, disability, etc.

Financially- assuming it's level term insurance, you've likely already paid more in premiums over the last 8 years than you would have paid for an equivalent 20 year policy and while that excess value is locked in, you probably can't monetize it by switching policies. Also consider the contestability period (2 years in most states)- as you've had the policy 8 years this means that the life insurance company cannot normally investigate whether or not the insurance should have been granted in the first place. You should not do anything to reset that clock without very careful consideration.
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Re: Should I Cancel Husband's Term Insurance?

Post by StevieG72 »

I would recommend reducing coverage. I have a $500,000 policy that is only $600 per year. I keep it because it is cheap, really don’t need the coverage anymore. I am certainly not going to cancel it in the middle of a pandemic!
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Re: Should I Cancel Husband's Term Insurance?

Post by bltn »

virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm
Stinky wrote: Sun Sep 06, 2020 9:02 pm
virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Tell us more.

How many years ago did you buy it? What was your rationale for picking $3 million as the coverage amount? What is the level term period?

What has changed in your financial life since you purchased the policy to make you consider lapsing the policy now?

And what does your husband think of canceling the policy on his life?
Mea culpa. I wrote a lazy post.

My husband leaves the finances to me. I bought the policy maybe 8 years ago, so 22 years remain. $3 million seemed like a lucky number; really, it was as silly as that. I'm thinking of cancelling b/c it seems like we might not need it. That money could go into our retirement savings.

If my husband died, right now, I would have:

-300k in 529s for two kids
-2.5 million-ish in retirement/taxable accounts
-MINUS a 1.5 million dollar mortgage (of course, I would sell the house if something happened and move into a smaller place)

I will probably inherit high six/very low seven figures from my parents, but I don't count on it.

Reasons to cancel: I can put that money to work in my portfolio.

Reasons not to cancel: I'm thinking of having another child. Life is unpredictable--what if someone gets an illness that requires long-term care and it's just me? If my husband passes, I could keep our house and still sends the kids to private school (a necessity s we're in a HCOL area with expensive houses and subpar schools).
How much of the 2.5 million is in the taxable accounts and accessible before 59 1/2 years old? With the possibility of another child, and a 1.5 million mortgage, I don t believe you should cancel the insurance. Revisit the idea in 5-10 years.
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Re: Should I Cancel Husband's Term Insurance?

Post by bberris »

I don't know your particular circs, but a male at 43 has a .001748 probability of dying during the year. Your 3 MM policy has an expected value of $5,244. You pay 2,400 per year. You can work it out with your actual ages. Does that help you decide?

When I try to argue this way, there are counters that insurance companies don't lose money on life policies. Correct, they don't lose money over the entire policy term. But they are in a money-losing position near the end term of level premium policies.

The reference to a pandemic seems a little dramatic. Life expectancy was reduced by about 6 mo for white males, 1.5 y for black and latino.
https://www.medrxiv.org/content/10.1101 ... 20148387v1

Edit: sorry that was the female death probability in the table. For a male at 43 it's .002870 for an expected value of 8,610.
Last edited by bberris on Tue Sep 08, 2020 6:11 am, edited 1 time in total.
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Re: Should I Cancel Husband's Term Insurance?

Post by runner540 »

virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm
Stinky wrote: Sun Sep 06, 2020 9:02 pm
virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?

Tell us more.

How many years ago did you buy it? What was your rationale for picking $3 million as the coverage amount? What is the level term period?

What has changed in your financial life since you purchased the policy to make you consider lapsing the policy now?

And what does your husband think of canceling the policy on his life?
Mea culpa. I wrote a lazy post.

My husband leaves the finances to me. I bought the policy maybe 8 years ago, so 22 years remain. $3 million seemed like a lucky number; really, it was as silly as that. I'm thinking of cancelling b/c it seems like we might not need it. That money could go into our retirement savings.

If my husband died, right now, I would have:

-300k in 529s for two kids
-2.5 million-ish in retirement/taxable accounts
-MINUS a 1.5 million dollar mortgage (of course, I would sell the house if something happened and move into a smaller place)

I will probably inherit high six/very low seven figures from my parents, but I don't count on it.

Reasons to cancel: I can put that money to work in my portfolio.

Reasons not to cancel: I'm thinking of having another child. Life is unpredictable--what if someone gets an illness that requires long-term care and it's just me? If my husband passes, I could keep our house and still sends the kids to private school (a necessity s we're in a HCOL area with expensive houses and subpar schools).

Yes, you are being penny wise pound foolish. As others have said, with the other numbers and lifestyle info you’ve given, $2400/yr is not going to make a difference in your retirement outcomes. $3 million would make a huge difference in your family’s life.

I am pretty confident that you could find $200/month somewhere else in a HCOL household budget with a $1.5MM mortgage and private school.
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virginiabirdie
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Re: Should I Cancel Husband's Term Insurance?

Post by virginiabirdie »

All good advice. Thank you. I will keep the policy!

You're right, I would not miss $200/month. And $3 million is the difference between staying where we are and moving out of the city.
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virginiabirdie
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Re: Should I Cancel Husband's Term Insurance?

Post by virginiabirdie »

virginiabirdie wrote: Tue Sep 08, 2020 7:45 am All good advice. Thank you. I will keep the policy!

You're right, I would not miss $200/month. And $3 million is the difference between staying where we are (keeping private scohol and standard of living) and moving out of the city.
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Stinky
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Re: Should I Cancel Husband's Term Insurance?

Post by Stinky »

virginiabirdie wrote: Tue Sep 08, 2020 7:45 am All good advice. Thank you. I will keep the policy!

You're right, I would not miss $200/month. And $3 million is the difference between staying where we are and moving out of the city.
You’re making a great decision!
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Dottie57
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Re: Should I Cancel Husband's Term Insurance?

Post by Dottie57 »

mega317 wrote: Mon Sep 07, 2020 3:11 pm I can't see how $2400 a year makes a difference. Your portfolio moves more than that every day in the market.
virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm Reasons not to cancel:
Until this paragraph is blank I just don't get it. OP you have a ton of money but also a big mortgage so actually not a very high net worth in proportion. You are the perfect candidate for life insurance!
This.

OP, you insure for the low probability events. You probably won’t need it, but if the worst happens you will be happy to have it. When your kids are fully launched and house is paid off then get rid of the insurance.
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gr7070
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Re: Should I Cancel Husband's Term Insurance?

Post by gr7070 »

sergeant wrote: Mon Sep 07, 2020 3:31 pm A very quick and back of the envelope guesstimate says that you should obtain a million dollar, ten year term policy on your husband and then cancel the current policy.
That's exactly what I had thought, as well. Maybe 1.5M or even 2 is better than 3M for 22.

I'm not a fan of over-insuring, but having a life insurance policy would seem wise in this scenario.

However, you definitely don't need 22 more years of it. I would absolutely cut that to 10. Getting an appropriate term would save a fair amount and not reduce your position since you'll be FI long before 10 years.

I'd also reduce the amount. The reasoning behind the $3M was foolish. Spend some effort on what's an appropriate amount; literally 30-60 minutes of brainstorming and critical review would pay dividends.

Lastly, I wouldn't care if you'll miss the $200 monthly; it's simply a waste regardless. A worthy charity and it's subjects would happily benefit from that. An insurance company would not be my choice for said charity.
Valuethinker
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Re: Should I Cancel Husband's Term Insurance?

Post by Valuethinker »

virginiabirdie wrote: Mon Sep 07, 2020 2:16 pm
Stinky wrote: Sun Sep 06, 2020 9:02 pm
virginiabirdie wrote: Sun Sep 06, 2020 8:43 pm When did you decide to cancel your term life insurance? It's $200/month for $3 million in coverage. We can swing it, but we probably have enough to pay for all kids college, my retirement, house, medical care etc. Husband and I are in our early forties/late thirties.

Am I being penny wise, pound foolish?
Tell us more.

How many years ago did you buy it? What was your rationale for picking $3 million as the coverage amount? What is the level term period?

What has changed in your financial life since you purchased the policy to make you consider lapsing the policy now?

And what does your husband think of canceling the policy on his life?
Mea culpa. I wrote a lazy post.

My husband leaves the finances to me. I bought the policy maybe 8 years ago, so 22 years remain. $3 million seemed like a lucky number; really, it was as silly as that. I'm thinking of cancelling b/c it seems like we might not need it. That money could go into our retirement savings.

If my husband died, right now, I would have:

-300k in 529s for two kids
-2.5 million-ish in retirement/taxable accounts
-MINUS a 1.5 million dollar mortgage (of course, I would sell the house if something happened and move into a smaller place)

I will probably inherit high six/very low seven figures from my parents, but I don't count on it.

Reasons to cancel: I can put that money to work in my portfolio.

Reasons not to cancel: I'm thinking of having another child. Life is unpredictable--what if someone gets an illness that requires long-term care and it's just me? If my husband passes, I could keep our house and still sends the kids to private school (a necessity s we're in a HCOL area with expensive houses and subpar schools).
On the kind of income your husband must be on, this does not seem an excessive amount of insurance?

It's easy to think what you *would* do in the disaster scenario of your husband dying. The reality could be quite different - if I was a widow I would not want to move within a year or more of my spouse's death - and I would not want the financial issues that accompany that. You might not be able to work at least in the short run.

1.5 million in debt? Private schools? You have not convinced me, at least, that you'd be in an OK position if your husband died.

You could price a shorter term policy. The way these things work, given his greater age, it might not be any cheaper. BE SURE that you keep the old policy in force for any exclusion period (they are usually legally mandated, by State, I believe). You don't want some smart ass lawyer to argue his car accident was actually a suicide - insurers will do anything to wriggle out of a big claim.

My father died suddenly, with no warning, around Friday noon. Death rode with him in that ambulance with him. He was effectively dead by the time he reached the hospital, although his heart kept beating long enough for the priest to read the prayer for the dying with my mother and a sibling present. We had his ashes in the ground by Tuesday about 2 pm. Then we went home and had pizza. When it comes, one is never really ready.

For personal reasons "thinking of having another child" tugs my heart strings. Please don't delay - time waits for no one.
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