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?