No. of Recommendations: 7
I left the rat race at age 49. I dropped all life insurance at that point. I dropped all but the firm-provided coverage several years earlier. When DW and I reached financial independence, there was no need to pay life insurance premiums any longer. I'm 55 now, still with no life insurance. If either of us died today, the survivor would have the same amount that both of us would have had if neither had died. The insurance racket is just that, a racket. Use term life while you need it, then get the heck away from those blood suckers.

The OP was talking about using life insurance as an alternative to an annuity with survivorship included...

It's a fairly slick method of hedging your bets....

For example... Say you work at a company for 30 years... Your pension can be paid in two ways... Say $3000 a month as long as YOU live, OR, $2200 a month for as long as EITHER you or your spouse lives...

Now, most people are going to take the second option... In many cases, these pensions represent the majority of a couple's retirement funds... If the husband takes the $3000 a month option and dies first, the wife ends up destitute, living on Social Security alone...

So most people take the second option, getting a guarenteed $2200 a month for both of them as long as one of them is still alive... However, in this case... if the wife dies first, the husband just wasted that $800 a month... and is still stuck with $2200 for the rest of his life instead of $3000 he could have had...

Here's where term-life insurance becomes an interesting hedge... The husband takes the $3000 a month option, and then buys himself a $500,000 life insurance policy... I just checked and a 65 year old man in good health can get a 20-year term limit life insurance policy for $500,000 for about $550 a month.

So the couple now has $2450 a month to spend instead of $2200. If the man dies first, the woman inherits $500,000 which is enough to provide $2000-$2400 a month... If she dies before all the money is gone, their heirs actually get what's left of the principal.

If the wife dies first, the man can cancel the life insurance policy and be back to making $3000 a month... or he can continue the policy and change the beneificary to his children.

You have to do the math, and it doesn't work for everyone... It really depends on how much the pension fund tries to screw you (you'd be amazed at the gaps between single coverage and coverage with spouse).

It's a pretty neat trick though... and can be a good use of life insurance for older people.
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