Married Finances: Life Insurance Isn’t Always Necessary

I joked to my husband that we should get life insurance on me when I leave my job, but that was only a joke because it is pretty much entirely unnecessary. (The questionnaire from my lawyer for our postnuptial agreement asked if we have any life insurance and my husband joked “We decided we didn’t need any on her life because she’s too loaded/baller for that.”) If anything happened to me, he could never need to work again. I sure hope I’m worth more to him alive though! :) If anything happened to him, I would never need to work again.

People try to sell you on buying life insurance when you’re young and healthy and have no dependents because it will be cheaper. I realize that we are a strange case and you the reader may need life insurance more than we do, but this should at the very least be an example of a critical thinking exercise.

Kathleen wrote a smart article evaluating how much life insurance her and her husband needed last year and I plugged in our numbers to the tool she linked:

I used their default final expenses cost of $15,000, the outstanding mortgage balance of $127,000, and our zero children.

I told the calculator my husband’s current expenses without mine, how much we have in savings and investments outside of retirement accounts, how much we currently have in retirement savings, my husband’s current income and marginal tax rate. It told me that I need negative $1.65M in life insurance on me. If I take out my husband’s income, the calculator then told me I need negative $200,000 in life insurance on me. When I swapped the numbers around to my current expenses without my husband’s (including the current mortgage payment), included the amount of life insurance that my husband has through his work (he has the minimum), and put that I have $0 of income, it told me that I need negative $500,000 in life insurance on him.

Now you might be saying “well what about when you have kids in the future, so shouldn’t you buy life insurance now to cover that future hypothetical?” And if you know me and my future planning at all, you’d be a bit surprised that I am not planning for that possibility, unless you also know that I don’t want kids. If you truly plan on having kids, it seems smart to me to buy life insurance before you get pregnant. The naysayers will tell you that you should buy life insurance in your twenties because it’s cheap and then you lock in low rates without worrying about any health issues. That may be the case for a lot of people, but my husband and I really truly believe that we have self-insured and don’t plan to buy life insurance. We may even manage to avoid buying it even if we change our minds and end up having children – that all depends on where our net worth stands when that happens. Mr. Money Mustache and his wife famously don’t have any life insurance either.

I’m writing this from a perspective of not yet being financially independent enough to support our joint lifestyle forever with our current net worth, but from being far enough along that our current net worth could almost support one of us forever.

A caveat here though: you really need to do research and calculations for your own situation. If you have children and you don’t have enough assets for your spouse to continue your joint lifestyle as is without your income or vice versa, then I cannot stress enough that you should very likely have at least a small bit of life insurance. What I am saying though is to not blindly buy life insurance and to think critically through your situation.

Readers, at what point would you self-insure on life insurance? How much life insurance do you have in your twenties?

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30 thoughts on “Married Finances: Life Insurance Isn’t Always Necessary

  1. We both have life insurance through our work. We could increase the amount, but we haven’t done so yet. Because we are jerks?! Actually, this is something we are discussing as open enrollment approaches. We do both have teeny, tiny pension amounts that would pay out to the survivor. It wouldn’t be enough to cover our mortgage, though. So, yeah. We have some number crunching to do!

    • The life insurance through work is really easy to increase if you need to. Especially if you guys plan to stay teaching, I would probably consider doing that. If you want to leave teaching at some point, I might get some outside life insurance.

  2. I have a 30-year term $1,000,000 policy which I put in my place near the age of 29. It costs me less than $60/mo. Until I know that I am marrying someone who is self-sufficient and that we won’t be having kids, then I see no reason not to have it. Better to be safe than sorry. Even if I don’t have kids or get married, that’s $$$ that can go to charity if I were to die young. It’s a huge ROI should I die, even at age 59 it’s better than 4000% ROI. I don’t think it’s completely unheard of for people to die before 60.

    • $60/month is still $720/year! That’s quite expensive, IMO, for something a person doesn’t know they need. It’s absolutely not unheard of for people to die before 60 – I have had friends get cancer in their 20s.

      I understand wanting to have some if you know you’re not marrying someone who is self-sufficient though I know that I would only marry someone who was – I don’t want a dependent relationship of any sort.

      • $720/year was less than 1.5% of my gross starting salary, so it doesn’t seem like that much? To me, I feel like if I were to tell myself that i’ll only date someone who is self sufficient, that I would be be drastically limiting the potential dating pool. I have enough problems in this area as it is, lol. My desire to not be single outweighs my desire to marry someone with similar financial means or income potential. Teachers, Social workers, Non-profit employees to name a few. Wonderful people doing wonderful things in the world. If they’re less nerdy about money than i am, I’m well prepared for that scenario.

        • We clearly have pretty different priorities. I try to look at costs in terms of absolute dollar figures, rather than relative to my income as the latter lends itself to easily spending money unnecessarily.

          I would rather be single than be with someone who I’m dependent on or who is dependent on me. It’s also much harder as a woman to date someone with less financial means because not all men are willing to be with a woman who has more money/income than them, so I didn’t even try that. Some of my friends whose husbands make less are then stay at home dads, but I don’t want kids, so that is a moot idea. I’m a very driven and motivated person and it would be hard to be with someone who isn’t similarly driven and motivated since that is such a huge part of my personality. Many of my guy friends are with women with less financial means than them, but most of my female friends end up with men of similar financial means to them.

        • I would agree with you about absolute dollar costs on many things, but not this. I just don’t think that $700 per year is “a lot of money” for the emotional satisfaction that I receive from having this coverage. I think it’s difficult to rationally assign a numeric value on a purchase that assigns incredible emotional comfort that you can leave behind a greater legacy for a “low” cost. It gets even easier to rationalize when I think that if I waited 10 years until I might be less healthy and have a bigger need for it, and it could be double the price for half the coverage.

        • It is absolutely difficult to assign a numeric value on a purchase that assigns incredible emotional comfort! I’m glad you get emotional comfort from your life insurance policy, but I know I wouldn’t, nor will my husband so we won’t buy them.

  3. Life insurance doesn’t make sense for me currently and most likely will never make sense, at least to purchase on my own. Work does give me a free policy for 1x my salary though which is a nice benefit. But otherwise I will self insure.

  4. We went from “definitely don’t need life insurance” when we were DINKS (equal incomes) to “definitely need life insurance” with a baby and unequal incomes – but we haven’t purchased it yet (eek!). We have a lot of stuff to clean up in our financial house right now and buying life insurance at least on my husband/the higher earner is at the top of the list. I think we’ll be able to self-insure again before 25 or 30 year term insurance expires, but I guess it depends on how much we will spend on college in a couple decades.

    • Ack yes you two need life insurance now! I don’t even want to guess how much college will cost in 18 years for your little one. I always gift 529 money for baby showers/first birthdays because of that! People who like babies can get the cute stuff, but education is really important to me.

      • My predictions on college cost are totally divergent… It could keep going up at 15%/year or whatever the current rate is or we could have a total disruption due to online ed etc. and it could become quite cheap. I have no idea. For the moment we’re just going to continue prioritizing our retirement savings and stash a little money away for DPR as we can.

        A 529 is another one of those To Do financial items! We are planning to contribute all the gift money we’ve received this year. I have to say we’ve received a lot of cute baby gifts that seem rather wasteful, like fancy clothes she might only wear once or twice that probably cost 10x more than the outfits she will wear many times. In many cases straight $ would have been put to better use, but what can you do?

        • Yeah that seems really hard to predict! Other than assuming that she will likely due higher education in some way because her parents both have PhDs.

        • She probably will go to college but I think I wouldn’t be fussed if she didn’t… I’m much less enamored with higher ed now than I was when I graduated from college. I’m pretty confident she’s a smart cookie so if she doesn’t go to college it won’t be a failure but rather because she’s doing something more awesome.

  5. I think it makes total sense for you guys to forego life insurance, given where you are in your financial lives and the fact that you’re not planning for kids. We have it through work and have our own term policies only because we bought them when we were a lot younger (no joke: I bought my term policy at age 23). At this point, the policies are so cheap that we’ll keep them until they expire in our 50s, but we certainly won’t ever buy new policies. But we see what we have now as the consolation prize if one of us loses the other — we certainly don’t need that extra money, but not having to track our finances so closely would be a good thing if we’re dealing with massive grief like that!

    • I wrote a will at 22! So we had similar thoughts :) I just didn’t see life insurance as necessary at that point since I was already planning on no children. We would obviously re-evaluate life insurance if we changed our minds on children, but that will depend on our financial situation at that point. It does make sense that if you already have them and they’re cheap policies to keep though! I’m also generally in favor of the cheapest policy that your employer will provide as they’re generally a pretty good deal. And yes, I don’t want to have to worry about finances while dealing with that level of grief! That would just be too much.

  6. I have life insurance through work, but only just enough to cover the mortgage on my condo. I definitely want to raise that and for BF to be insured once we get married. I expect I will self-insure if we hit FI at 2% SWR. Otherwise, at least while raising kids, I’d feel nervous about it.

    • If we were planning on kids, I’d probably go for it now while we’re in our twenties, but we’re not. I think we’re around a 6% SWR now assuming only one person’s expenses and I’m happy to self-insure at that point based on our income potentials.

  7. We just cashed out 2 whole life insurance policies and it was amazing how much it took to mentally flip the switch to “No! We are fine!” I ran the calculations through that calculator and granted it included the living spouse still working, but we came out adequately insured with the employer provided insurance. I look forward to changing my dead husband plan to not include me working!

    • That must have been an emotional decision since your policy was from your grandpa, right? Yes I hope your dead husband plan involves you not working for a while what with the grief and all! I know I couldn’t imagine life without mine <3

  8. We’ve never purchased life insurance, but we do have the coverage that comes for free from our employers (over $200K for each of us), which as of at least a year or two ago would be more than enough to put either one of us over the top in terms of being FI.

    For us (also most likely child-free permanently), even when Mr PoP was unemployed when we first got married and bought the house, we never considered buying life insurance. Our mortgage approval was based on my income and credit alone and if worse came to worst, I could sell the house and be back renting the way I had been pre-marriage. And we have always both lived comfortably on less than one of our salaries, so buying more coverage just seemed like a waste. Our secondary beneficiaries will already have quite significant windfalls if we both kick it at the same time, so why pay to boost that even further?

    • I actually reduced my work-provided life insurance down to the minimum ($50,000), but my husband’s minimum is over $200k as well.

      It sounds like you two have pretty similar thoughts to us on life insurance :)

  9. We got term life insurance (25 years, 500K/each) like 2 days after DC1 was born. Fun fact: Life insurance agents make house visits, complete with nurse to take blood draws. Fun fact: women’s cholesterol is higher while breastfeeding. Fun fact: this led to my rates being $40/year higher than DH’s. Apparently I could have contested that if I’d found out before several years had passed. By the time I found out I was older and would have to redo everything and then lock into higher rates because I’m older.

    The idea is that there’s enough money to pay for either of our children to finish college without worry. Earlier we also wanted the house to be able to be paid off if one of us died and there to be money for raising our children if we both died. (Now we have enough of an estate that the latter two items are less important.)

    I also get funeral insurance as a work benefit whether I want it or not.

    We spend just over 1K/year on life insurance. Insurance overall makes up a huge percent of our annual spending.

    • Your story is why I warned Penny (first commenter above) that they should get life insurance before they get pregnant if possible :)

      Those all sound like sound methods of deciding how much life insurance to buy! I definitely hear you on the wanting to pay for your children to finish college without worry – that’s something that my husband and I have agreed on even though we don’t plan on having children.

      • I dunno though, $40/year for 25 years = $1125, much of which is in inflated tomorrow dollars. If it takes a little over 1 year to get pregnant (and 9 months to gestate), then you’ve lost that in insurance you didn’t need in uninflated today dollars. Especially since you can ask to get retested with most insurance companies, or have them take into account the additional cholesterol (I have been told).

        • I love your practical math! My husband’s parents want us to have a bigger house so they can visit for longer and I told them that it is significantly cheaper for us to have a smaller house and to pay for them to stay in a hotel or Airbnb nearby than to have a bigger house that they could visit. We would re-evaluate that if they visited for longer or more often, but they seemed to accept the practicality of that.

  10. My father left me and my mother a modest life insurance policy that paid off our home, debts, and actually a decent amount of money in savings. Growing up relatively poor, this was such a windfall, I was determined not to squander it. Unfortunately, this was also before the internet and financial information was in the hands of crooks… I lost about half that savings through various “investments” our life insurance agent suggested not knowing anything about his commissions…I trusted him because I thought since he “gave” us that money he would help us conserve it or actually make more from it. Anyhow, the best thing that the life insurance did for me was to pay off the mortgage. It allowed me to save money, even with my modest income. When I got married and the income doubled and expenses where halved, our savings really grew. When we had saved a “5 year emergency fund,” it opened my eyes to what financial independence could be like. My perception changed when I had access to money on a whim and confidence that we could weather almost any emergency one would typically use a credit card for. I actually was able to churn credit cards to earn cash back. I was able to satisfy Chase bank’s requirements to earn a $400 and $500 reward for opening accounts with them. I was able to finally start a 401(k) because I didn’t need that money to pay bills anymore. So many opportunities when you have money…anyways to get back on topic :) to be able to self insure is an amazing financial milestone! Insurance can be the biggest ripoff…oh to answer your two questions, for me I would like to have 500k in savings to be considered self insured. In regards to how much insurance I had in my twenties, I bought a whole life policy for 100k thinking that was a lot of money. Due to inflation 20 years later, I purchased a 500k term life insurance policy. I hope my mistake in underestimating inflation reducing the value of life insurance will be one you youngsters do not make :)

    • I’m so sorry that you lost your father early in life. Don’t worry about getting off track – that was a lovely description of what being partway towards financial independence means :)

      Do you mean $500k in savings combined between you and your spouse? That seems like a pretty reasonable starting figure to self-insure to me. We are definitely past there if you take out the condo equity, so sounds like we are on track by your definition. We would absolutely re-evaluate if we have children some day though.

      • 500k is my amount for my life at the moment. Everyone should have their own number really because everyone’s life situation is different. Assets, debts, expenses, and incomes, are just too varied to arbitrarily pick a number to determine anyone’s self insurance level. Weigh carefully and adjust for inflation 😀

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