Monday, January 24, 2022

Money Monday-Reevaluating Life Insurance

     


     As life changes, our need for protection in worst case scenario changes as well. With DD2 graduating college next year, by June 2023, theoretically we have no more dependents, or people depending on us other than each other. We do however depend on each other's income an awful lot right now for both living off of, and saving for retirement. We both have policies through work, an annuity started when we were pretty young, and  term life. I added more insurance for myself three years ago when I had the extra scare, and realized I was woefully under insured considering the college kid was still just 18 and we relied on me working for health insurance. While I don't think we can over prepare, I think we are in an adequate place for now.

     However, with DH retiring, I lose some security in two years with his employer provided life insurance. We are starting to price out options to replace at least part of it, at least through my turning 66 and able to fully access Medicare, so approximately a 10 year policy. Three years ago we added an affordable 15 year policy for me, so starting with that company for a bid. 

     I am not an expert by any means, and this entire post is anecdotal to myself, but  hopefully gives you at least things to think about for your own protection. I  starting asking these questions and quite frankly, should be doing so at least annually and adjusting or modify strategies as needed.

  • Who all and for how much, is dependent upon my salary? How long will this need continue?  
  • How much ongoing income will need to be replaced and for how long?
  • Would a lump sum payout help minimize the ongoing financial needs? Think of things like paying off a mortgage, a car or other consumer loan, or lingering student loans. Is there any tax penalties to those lump sums? 
  • What about interim expenses? For example, if both DH and I pass away we'll leave our kids a house to deal with. They'll still need to pay taxes, insurance, utilities and maintenance until either one of them takes it on from the other two, or they sell it outright. While assets can be sold, there's no guarantee how quickly.
  • What bills will increase with me or our significant other no longer being around? Think of all the things that might need to be hired out or conveniences that your dependents might need at least while they are adjusting to a new life. For example, DH does all the outside stuff pretty much himself. I'd want to make sure I have funds to cover hiring this out. He'd likely bring someone in perhaps at least one half day a week for housework.
  • How much will health insurance cost my dependents if I no longer accessed through my work? If you carry the policy, what will your employer allow for transition? 
  • What about final resting costs? How will those be paid? (better yet, does your family know your wants and preferences now?)
  •  What can my dependents access of my current assets, and what might be lost if action doesn't happen before I pass away? Think of our list of beneficiaries. Are the right people named? Are there stipulations in place for how the assets get divided. Make sure you are not leaving a headache and potential hard feelings for your loved ones. Consider if they might have a tax penalty and how to minimize and prepare for that. 
     Our best bet is to seek professional guidance from someone who is not paid through commission on sales of products. Yes, it is not cheap, but I simply can't know what I don't, and questions above aside, what all I should be asking. I certainly don't have the answers even if I knew all the questions. All of us have different needs and wants for our post retirement. Sometimes sadly, life takes turns that were not part of the plan. We owe ourselves to face that possibility and not be saddled with worry about what ifs. 

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18 comments:

  1. My aunt always told me to prepare for the worst and hope for the best. That's all any of us really can do.

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    1. Smart aunt. No one wants to think about worse.

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  2. I worked for the state of Minnesota and retired from it with a great pension and continued my life insurance through them but as I am a little cloudy on the exact details I believe you can continue paying those premiums and that policy (id taken out quite a bit more than the state paid) only till 65. Then I believe they take 15% of that policy and set it in an acct. as a death benefit. (Which will more than cover my funeral/immediate needs). Then I could get private insurance which was way too expensive. My kids are all grown and gone/on their own. And I’m a widow. There’s of course grief from being a widow for 25 years! But I really never thought about the unbelievable difference two SS and retirements would have been. So much living cost are the same, property taxes, heat, housing etc. all of my friends are in that post of double SS and pensions.

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    1. I think you've hit the nail on the head. We plan our retirement together, but if one of us isn't here, needs change and income changes. Many expenses will be the same for one. How long did you work for the state? Did you benefit from rule of 90?

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  3. You make some good points! Thanks!

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    1. Now to make sure we follow up ourselves.

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  4. I would add get funeral arrangements made NOW and prepay... or asign a life ins policy to that funeral home. Daddy prepaid and Mother assigned life ins to cover it. Daddy had all his stuff dealt with, casket, grave marker etc. A few things wasn't. Mother had nothing. I wrote her obit the morning of our Thanksgiving dinner, which triggered Daddy to deal with his.

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    1. That's part of our plan. My parents and FIL had planned and made the burden a bit lighter.

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  5. We lost our company life insurance when we retired and once we priced continuing insurance it was astronomical. We have comfortable pensions and no dependents so we opted to not continue as did other childless friends. Funeral prepaid arrangements are on our to do list this year.

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    1. I'd at least like to find DH a 10 year plan. It would make a huge difference in my life should the worst happen in the next decade.

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    2. I'll be curious what kind of rates you find.

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  6. When my brother became sick and died suddenly was when I realized I wanted my future funeral expenses covered, so had an appointment lined up with my bank for when I got back from Wales. I also set up a file called "Life in Motion" (for want of a better title) and put all my pin codes, bank details, pension, sickness insurance, funeral insurance - basically anything I could think of that my kids might need if and when. It won't take all the work off them but it will give them a good start!

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    1. Life in Motion- great file name. We need to better document everything for our kids. This post was part reminder to myself.

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  7. We both do not, nor can we get insurance of any kind. Our term policies both expired and with our health conditions no one will insure us, so no big payout for us. However, if something happens to one of us the other will be okay, I would actually be better off, as I have a way to earn money.

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    1. I wonder about those TV advertised ones. Maybe even a small policy would help? I wonder if my husband can find one. Mine was much more than we'll add for him. I just want to replace his work policy.

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  8. Your point about the house expenses having to be paid until it sells is a good one to consider. I have an elderly aunt who still has a mortgage on her house. None of her children could afford to carry the house for the time it will take to sell. It is in the country and will likely take longer than usual to sell. I'm not sure what will happen as I don't know that she has much liquid cash to be accessed.

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    1. I don't want anyone to feel bad with this post, but exactly why a mortgage after retirement to me feels so risky. All the assets could be wiped out for our family if they have to come up with cash for several months.

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  9. We stopped our life insurance a few years ago as we have no dependents, no grandchildren & we worked out we could clear out debts & manage financially if the worst happened to either of us I think its so important to keep re-evaluating insurance needs throughout life.

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