DCUM Hive Mind: Can I get rid of my term life insurance?

[Anonymous]

I think DW and I are at the stage of our lives where we can get rid of our term life insurance. We are in year 25 of 30-year term policies that cover us for $1,000,000 each, and now cost us about $160 earch per month - going up about 5% a year for the last five years.

Here is our financial situation.

I am a Fed (with a stable job, even in the Trump era). Income is $180,000 per year.
DW is a charter school teacher, making $90,000 per year.
We have about $40,000 per year in income from a rental property.

Our only major debt is our mortgage - PITI is about $3,700 per month, and because of refinancing, is unlikely to be paid off soon.
We have two kids. DD #1 is out of college, and settled into a career. She is - fingers crossed - entirely financially independent. DD #2 is going into her senior year in college, and we have enough in her 529 to pay all her costs for this coming year.

With regard to retirement and other savings, we have:

$1.4 million in tax-deferred accounts (401K and TSP accounts)
I have qualified for a pension that would pay my survivors $65,000 per year if, heaven forbid, something happened to me today.
We have about $300,000 in other taxable investment accounts.
We have about $750,000 in home equity between our primary home and our rental property.
We both qualify for Social Security, which I assume that we could begin receiving payment at retirement age.

It feels good to have life insurance, but it also costs a lot. And at this point, with a good nest egg, my children's college paid for, and lots of home equity, would a smart financial advisor tell us that we no longer need life insurance?

What say you, DCUM?

[Anonymous]

The reason to have life insurance is to provide for young children in the event that 1 spouse dies unexpectedly. Your children are launched/almost launched. I think you can drop it, IMO.

[Anonymous]

Seems worth it to keep it. Your survivors will be significantly better off for only $160/month over 5 years (with modest annual increases).

[Anonymous]

We dropped ours in similar circumstances. The payments didn’t make sense for what the possible payout could be.

[Anonymous]

I would drop it under those circumstances. There are better ways maximize the chance to leave a nest egg for the kids.

[Anonymous]

I said keep it in previous post, and just realized you said $160 each. I'd consider dropping the one of lower income earner bit keep the other.

[Anonymous]

Like a pp said your life insurance served its purpose. At this point you are just betting against yourself and unless you are terminally ill the odds are not favoring your bet.

[Anonymous]

Anonymous wrote:The reason to have life insurance is to provide for young children in the event that 1 spouse dies unexpectedly. Your children are launched/almost launched. I think you can drop it, IMO.

Agree. And it took me a long time to get to this state of mind, as my parents kept theirs up long after their kids were launched and I thought it was something everyone should do. You have enough to continue at your current lifestyle were anything to happen, so no need to keep up the increasingly expensive policy.

[Anonymous]

If you decide to get rid of it, you should sell it as opposed to dropping it. Years 25-30 of a 30 year term policy are the most valuable and there are legitimate companies that will pay you for it.

[Anonymous]

Anonymous wrote:Seems worth it to keep it. Your survivors will be significantly better off for only $160/month over 5 years (with modest annual increases).

+1 $2k/year seems worth the cost/benefit here. Would your surviving spouse/kids be out on the street if you died without insurance? No. But they'd be much better off if you still had the insurance, and it's just a few more years which coincides nicely with your second kid being fully out of college and settled.

OP just think about it as 2/3 of one month's income from the rental property covers your insurance costs.

[Anonymous]

I dropped out term life policies when the youngest kid graduated college.

[Anonymous]

I wouldn't given you are almost done with it.

[Anonymous]

I just dropped mine when my youngest graduated college.

I'm a divorced mom with $2M in TSP.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Seems worth it to keep it. Your survivors will be significantly better off for only $160/month over 5 years (with modest annual increases).

+1 $2k/year seems worth the cost/benefit here. Would your surviving spouse/kids be out on the street if you died without insurance? No. But they'd be much better off if you still had the insurance, and it's just a few more years which coincides nicely with your second kid being fully out of college and settled.

OP just think about it as 2/3 of one month's income from the rental property covers your insurance costs.

Assuming OP is around 60, odds of dying over the next 5 years is 5%, multiply that by 1 mil payout and you get the expected benefit of $50k, which is higher than the $10k cost of insurance. Looks like you are right PP.

[Anonymous]

It's not clear, unfortunately.

You don't need it, but you're paying about $2000 year for $1 million of insurance. That's only 0.2 percent. Your chance of death is very low, but it's a lot higher than when you were 30. (In term, you generally pay more than it's worth at the beginning, when you are very young, and less than it's worth at the end, when you are middle aged.) So it might be reasonable to keep it.