Saturday, February 9, 2008

Saying Goodbye to Life Insurance

I cancelled my life insurance three days ago.

I'm still not sure I did the right thing.

It was a term life policy that cost me $78 a month for $500,000 in coverage. I got it when I was first diagnosed with Type II Diabetes and had a sudden whiff of mortality. At the time, I had three children under 18 and living at home. It was a 10 year, equal premium policy that would have to be renewed (if possible, and at a much higher rate) in two years. I do not begrudge the money spent for the policy. It gave me peace of mind that I would leave something behind for the care of my children. But increasingly, it became harder to justify the expense.

In addition to getting rid of the monthly payment (well, quarterly, actually, but I save for it monthly), my thoughts were these: All my children, except my youngest, are on their own. My youngest daughter is almost 18. She may go to college but it is likely to be a community college. The older daughters are now almost 40, 33, 26 and 23. My net worth is over half a million (due largely to my two houses, not my currently-dwindling 401(k) funds). If I die tomorrow, each of my children will get in excess of $100,000 from my estate alone, never mind the life insurance.

So I held my breath and sent in the cancellation notice.

There's no going back on it now. But can I breathe yet?


Canadian Saver said...

It's a hard decision, isn't it? I'm single and still had a hard time deciding to cancel mine!!

I think you did the right thing...

Bob McD said...

I agree, Grace, I let mine go a couple of years ago. My reasoning was that, since life insurance is not really to insure against death (a sure thing), but rather against "premature" death (i.e. dying before financially "taking care of business"), there ought to be a time when you don't need it any longer.

While I missed my original goal of age 45 by quite a few years, it has been great not paying that annually growing premium.

Bob McD

Anonymous said...

If you have no minor children or someone else that you are responsible for financially, then there is no reason for life insurance. You did the right thing.

Living Almost Large said...

Breathe, ti's fine. I don't have any as a married DINK and my parents with four children ages 28, 38, 47, and 48 cancelled theirs 8 years ago as I finished college.

Done. They said it felt very weird, like they were being bad people. If you feel okay with providing more to the child in college, in case you die in the next 4 years do so.

If not, no biggie.

Grace. said...

Good. The votes are going my way.
But as Living Large's parents (who are probably from MY generation) say, it DOES feel like I've done something I shouldn't. OTOH, there are many places to put that extra $78 a month.

Anonymous said...

My husband and I cancelled our life insurance years ago after our youngest graduated from college. But then he became an entrepreneur, started a business and now we're trying to get life insurance again. It's a lot harder ten years later when he's ten years older. I'm not so sure getting rid of our life insurance was such a smart move.

Julie the Graduate said...

Congratulations!! You were very smart to realize what the life insurance salesmen don't like people to know.

As for anonymous, I wouldn't worry too much about what they said. I think that once your children are in or done with college (depending on how you feel), it's perfectly reasonable to expect them to care for themselves. If they choose to open a business, they shouldn't be dependent on mom & dad!

Anonymous said...

Kind of ironic for me, since I just said hello to life insurance. My term will end when my children are in high school or college, by then my husband really won't need to worry about childcare for them. His goes a bit longer though since he is the main breadwinner.

Anonymous said...

Congrats on getting rid of your term life. Did you have to call anyone? I've been trying to cancel my life insurance several times but my life insr agent keeps talking me out of it until I get tired and just go home.

Anonymous said...

life insurance is the only thing you can leave your beneficiaries that passes down without any estate tax. IRA's, 401K and yes, even a house will have taxes due on it when inherited.

we are only remembered by our last good deeds, so to speak. how do you want your family to remember you? mired in taxes to the government or getting a tax free inheritance?

$100,000 is nothing. what about grandchildren and other generations to come?

Read some of the retirement books by Ed Slott, certified tax expert: his advice: life insurance is the greatest gift.

we are all going to die.
personally, i think you made a grave error (no pun intended) canceling your life insurance.

Petunia 100 said...

Anonymous 6:54 must sell life insurance for a living.

I disagree with his statements because:

1. Estate tax does not kick in for estates valued at under 2 million (current law). Therefore, a non-issue.

2. Grace's children are all legal adults. Therefore, Grace has to take care of Grace first. Once that is done, it is appropriate to consider what sort of legacy she wishes to leave for children, grandchildren, charities, etc. Since Grace is behind on retirement savings and trying to retire debt, those things take precedence.

Anonymous said...

You write very well.