General dumb question Re: Quitting Term life insurance

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Topic Author
ksualum
Posts: 135
Joined: Mon Jan 15, 2018 3:01 pm

General dumb question Re: Quitting Term life insurance

Post by ksualum »

Hello everyone!
Just curious does anybody have some good advice as to when it doesn't make sense to carry Term insurance anymore?
I am trying to decide whether to cancel mine and my wife's but I was just wondering if anyone had a personal calculation
that they used to determine when they could completely drop their term insurance?
I am still quite young (39) and my wife is 32. We have two young kids (3 months and 2.5 years).
With our investments accounts we are starting to really put some distance between us and poverty.
I'm just trying to decide how long we should hold our term insurance policies and if anybody has any good advice on how
they determined when to drop it. Thank you! And sorry for the long post
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ResearchMed
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Re: General dumb question Re: Quitting Term life insurance

Post by ResearchMed »

ksualum wrote: Wed Jan 13, 2021 2:23 pm Hello everyone!
Just curious does anybody have some good advice as to when it doesn't make sense to carry Term insurance anymore?
I am trying to decide whether to cancel mine and my wife's but I was just wondering if anyone had a personal calculation
that they used to determine when they could completely drop their term insurance?
I am still quite young (39) and my wife is 32. We have two young kids (3 months and 2.5 years).
With our investments accounts we are starting to really put some distance between us and poverty.
I'm just trying to decide how long we should hold our term insurance policies and if anybody has any good advice on how
they determined when to drop it. Thank you! And sorry for the long post
Quick answer, when those who depend upon your income and your care (e.g., paid care would be needed to replace it) do NOT any longer need that money to be comfortable at the level you were planning on if you continued to provide for them.

"Distance between [you] and poverty" may or may not indicate that there are enough resources to care for the children and spouse (including another caretaker if relevant) if one of you passed.

Isn't that what you took out the insurance for? Thinking about the reason you have the insurance should help you to figure out if you still need it.

Some people get two policies, e.g., a 25 year and a 15 year or such, because after 15 years, much the the need for replacement money/care isn't relevant anymore. Then the longer term policy can suffice for the remaining years.
It's the same thinking, but at the planning stage.

RM
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Topic Author
ksualum
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Re: General dumb question Re: Quitting Term life insurance

Post by ksualum »

Thank you RM! That makes sense. I think I will probably hold it for a bit longer then since my daughters are so young . . .

I do think if something happened to my wife or me we might need to get additional help with childcare. . . .
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Tamarind
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Re: General dumb question Re: Quitting Term life insurance

Post by Tamarind »

The short answer is drop it when you no longer need it. Term is there to literally replace the remaining lifetime earnings (or unpaid work value) of each person.

If the higher earner were to drop dead tomorrow, could the other raise the kids to adulthood and retire on schedule without major hardship? By hardship I mean having to scramble to make more income, sell the house, or experience a major drop in standard of living.

If no, carry insurance on the higher earner for sure.

If you have a SAHP and that parent were to drop dead tomorrow, could the other parent afford to hire full time childcare, raise the kids to adulthood, and still retire on schedule without major hardship?

If no, carry insurance on the SAHP.

If you're pursuing early retirement, I'd suggest keeping the term insurance until you get there. If not, then at least until you have got the kids to 18 and sorted out whatever you intend for college funding.
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gr7070
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Re: General dumb question Re: Quitting Term life insurance

Post by gr7070 »

ResearchMed wrote: Wed Jan 13, 2021 2:30 pm Quick answer, when those who depend upon your income and your care (e.g., paid care would be needed to replace it) do NOT any longer need that money to be comfortable at the level you were planning on if you continued to provide for them.
Simply this.
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JoeRetire
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Re: General dumb question Re: Quitting Term life insurance

Post by JoeRetire »

ksualum wrote: Wed Jan 13, 2021 2:23 pm Just curious does anybody have some good advice as to when it doesn't make sense to carry Term insurance anymore?
It's very easy. It doesn't make sense to carry term insurance when nobody is depending on your income to live the lifestyle they wish to live when you pass.

That's all there is to it.
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.
Topic Author
ksualum
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Joined: Mon Jan 15, 2018 3:01 pm

Re: General dumb question Re: Quitting Term life insurance

Post by ksualum »

Thank you everyone!
I think this reinforces the need for term life insurance for me until my daughters are in college . . . thanks much! :sharebeer
HomeStretch
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Re: General dumb question Re: Quitting Term life insurance

Post by HomeStretch »

Do you and spouse have term life through your employers or your own level-premium 20/30 year policies?
Dottie57
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Re: General dumb question Re: Quitting Term life insurance

Post by Dottie57 »

Tamarind wrote: Wed Jan 13, 2021 2:38 pm The short answer is drop it when you no longer need it. Term is there to literally replace the remaining lifetime earnings (or unpaid work value) of each person.

If the higher earner were to drop dead tomorrow, could the other raise the kids to adulthood and retire on schedule without major hardship? By hardship I mean having to scramble to make more income, sell the house, or experience a major drop in standard of living.
This. Keep it until financially independent. Take care of your family even in death.
Normchad
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Re: General dumb question Re: Quitting Term life insurance

Post by Normchad »

Insurance is to protect against a financial loss.

I’d recommend keeping both policies until you reach a point where your deaths wouldn’t create a financial problem. For me, I planned to keep them at least until all the kids reached age 18.

Also note that if you drop them, it will be harder to repurchase them later if you change your mind. There is a recent thread where an otherwise youngish/healthy poster couldn’t get a term policy due to a medical test.

So I’d keep it until the kids are18, then revisit it. For me, I don’t need it anymore, but am keeping it anyway because it’s pretty darn cheap.
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