When do I drop the term life insurance policy?

[VagabondMD]

I am seeking opinions on when I should stop paying for life insurance. Are there any guidelines, rules of thumb, academic papers, calculators, etc.?

I am 50 years old, in excellent health with no relevant family history of disease, have enough of a nest egg that I eyeing retirement, and am married to a woman who has her own career that earns her quite enough that we could both easily live off her salary. The children are teens and have ample money set aside for college and starting in life. (Both also have Roth IRAs, too!).

I currently pay $875 per year for $1.5M in coverage. Is it time to pull the plug on the policy? I do not have the paperwork in front of me, but I believe that there are five or so years left on a 20 year term policy.

[MD Financial Services]

Life insurance is simply to provide a cash asset that your family needs to maintain or create a lifestyle which you have yet to earn and save.  If you have hit your target asset number that will take care of your family and the lifestyle you want to provide then your 'need' is not there and all you have potentially is a 'want'.  Only you will know if your 'want' is worth your $875 to leverage against the insurance companies $1,500,00 or $25 per month per $500,000 of coverage.  Just to let you know I ran the cost for a new $500,000 policy for you and at age 50, perfect health, 10 year rate lock, the rate is $41.  If you have a 'want' then the contract you currently have is efficient, if you don't want to have $1.5 million then ask the carrier if you can reduce the benefit amount, most will allow it.  We use advisor side of Term for Sale so it looks at pretty much all of the carriers in the market place, you have a good deal on a cost per dollar of coverage.....assuming you 'want' it.

[jfoxcpacfp]

Vagabond MD wrote:

I am seeking opinions on when I should stop paying for life insurance. Are there any guidelines, rules of thumb, academic papers, calculators, etc.?

I am 50 years old, in excellent health with no relevant family history of disease, have enough of a nest egg that I eyeing retirement, and am married to a woman who has her own career that earns her quite enough that we could both easily live off her salary. The children are teens and have ample money set aside for college and starting in life. (Both also have Roth IRAs, too!).

I currently pay $875 per year for $1.5M in coverage. Is it time to pull the plug on the policy? I do not have the paperwork in front of me, but I believe that there are five or so years left on a 20 year term policy.

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If you die in the next 5 years, what will the money be used for? Perhaps that is a conversation to have with your wife as it may impact your decision. My advice would be to drop the insurance after 5 years, of course, but I realize that you are trying to determine whether you want to spend $4,375. Kind of a tough call because you have a good rate.

[Hatton]

If you have a large enough nest egg to take care of your wife and children in the event of some type of accident then I would drop it. I would of course get input from your wife. I think many people continue to pay for life insurance and disability insurance without thinking about it.  I dropped disability when I decided I had enough money in my midforties to live out my life.

[PhysicianOnFIRE]

It sounds like you're spending $2.40 a day for a death benefit that is no longer necessary. I believe your wife makes a salary similar to a physician's and you are pretty close to, if not beyond, financially independent.

The latte-a-day like cost isn't going to make or break you, but if your wife is on board, I think you could stop making payments at any time. That's exactly what I did.

[AlexxT]

I have wrestled with that same issue, and I have decided to keep my term policies until they expire, even though I have enough money to retire on.  The short version of why I keep them is that I consider the extra life insurance policies, like the mortgage I shouldn't have paid off, to be a luxury good that helps me to sleep better at night.     It's worth the few dollars a day that I pay for them.  Since I don't drink latte`s, and cancelled cable in favor of an antenna,  I have lots of extra luxury money to pay for those policies.

[EnjoyIt]

I'm not a fan of being worth more dead than alive.  I currently have no term life insurance since my wife makes good money, and our assets are large enough that there will be no need for a million dollar windfall.