Two weeks ago I mailed the last mortgage payment. $893, same as every month since 2012, except this time there's no next one. I put the confirmation in the green notebook and wrote "PAID" across it in red pen, which felt very official for a woman sitting at a kitchen table in her slippers.
A few days later the annual statement for Greg's term life insurance came in the mail, and I found myself asking a question I'd never asked before. What is this policy for now?
What we bought it for in 2004
We bought two level-term policies in the spring of 2004. Emily was five and Josh was a baby. We'd been in the house five years, the mortgage was the biggest number in our lives, and I remember lying awake doing the math on what would happen if Greg didn't come home from his route one day.
- Greg: $300,000, 25-year term, $41 a month
- Me: $150,000, 25-year term, $22 a month
Both run out in the spring of 2029. The premiums have been the same the entire time, which is how level term works. You lock in the price for the length of the term, and when it ends, coverage ends, unless you renew at a much higher price based on your age then.
The goals were simple. If one of us died, the other could pay off the house, keep the kids fed and get them through school. Greg's policy was bigger because his paycheck was bigger.
What's changed
Almost all of it. The house is paid off as of this month. Emily is 27, married and an ICU nurse in Columbus. Josh graduates from UC in late April and starts a job in Indianapolis in June. Nobody needs us to pay for school or braces or a first car anymore.
What hasn't changed is that we still depend on Greg's paycheck. I left my school job last June, and my bookkeeping work brings in about $1,000 a month. My SERS pension is frozen and I'm not drawing it yet. Greg plans to work until about 64, which is five more years. If he died before then, I'd lose his income, his health insurance for me and his future 401(k) contributions.
Social Security would help some. As a widow I could get a survivor benefit, generally the larger of his benefit or mine, but the timing and amounts depend on age, and the earliest reduced survivor benefits start at 60. That would leave a few lean years.
How we thought about it
I made a list of what I'd actually need if something happened to Greg in the next three years, the time these policies have left:
- Health insurance until Medicare at 65. I'd be buying my own on the marketplace, which I priced last spring at $590 to $780 a month at 55, and more by then.
- Living expenses until I could draw SERS and Social Security. Without a mortgage, our bills run about $3,400 a month.
- The roof, which we already know needs replacing in the next couple of years.
- Final expenses, which I'm told run $8,000 to $12,000 for a simple funeral around here.
Add that up for a few years and $300,000 doesn't look like too much. It looks about right. Greg's 401(k) would pass to me, but I'd rather not drain it in my late fifties.
My own policy is a different story. If I died, Greg would lose about $12,000 a year of income from my bookkeeping and my eventual pension, but he'd still have his paycheck and his 401(k). The $150,000 is a nice cushion, but not a need in the same way.
Then there's the cost. Together we pay $63 a month, or $756 a year. Over the three years left, that's $2,268 to keep both. Buying new coverage at our ages would cost several times what we pay now, if we could get it, and Greg's bad knee wouldn't make the health questions any easier.
What we decided
We're keeping Greg's policy until it ends in 2029. It's cheap for what it covers, and the three years it has left are exactly the years I'd be most exposed.
We're keeping mine too, for now. Greg's opinion was, "It's twenty-two bucks. Leave it." I argued for dropping it for about five minutes, and then I lost on the merits.
When the policies end in 2029, we don't plan to renew them. The renewal rates at 59 and 62 would be steep, and by then Greg will be close to retiring, I'll be closer to my pension, and we'll have more saved. The point of life insurance for us was always to cover a gap until we could stand on our own. That gap is getting smaller every year.
Greg's employer also gives him group life coverage equal to one year's pay. That's nice, but it ends with the job, so we don't count on it.
If your kids are grown and your house is paid off, you may not need what you once did, or you may need it for different reasons. I'm not an expert, so if your situation is complicated, sit down with someone who does this for a living and doesn't earn a commission on the answer. For us, the answer was to ride out the last three years and let the policies retire gracefully.
