When Life Insurance Stops Making Sense

00:00 - Opening

Hey, welcome to Slow Builds.

The other night I spilled a full cup of black coffee all over a white-gray couch.
Completely black.
Total panic mode.

But somehow, that coffee spill ended with my wife and her parents telling me I need to get life insurance.

And the strange part is, when I actually looked into even trying to get it and did a couple quotes, the insurance companies themselves told me I probably should not be buying this because I do not seem to need it based on my situation.

00:30 - How It Escalated

So what happened is after the spill, and trying to do our best to clean it up, which I think we might have saved the couch, later that evening she went down to visit her parents.

Towards the end of that I started getting texts and phone calls just basically saying:

Go get life insurance.

Apparently the logic of how they got there was:

Oh, he spilled coffee. Maybe something is wrong.

What if it was a stroke?
What if he has a heart attack?
Do you have life insurance?
No?
Go get it now.
You need it.

So it was a very quick escalation from spilling some coffee to you might die.

01:05 - I'm Not Against Life Insurance

And now to be clear, I am not against life insurance.

Insurance just has to solve a real problem.
And that is the entire point of it.

You insure risks that would cause real financial damage if they happened.

So I started asking questions.

Why do we need it?
If I died, what would the money be used for?
What situation do you see needing to have the money?

And the only reply I kept getting was just:

Get it.
I do not care.
Get it now.

01:40 - So I Looked Into It

So when she did come back, she said pretty adamantly to go get it or she was going to go get a life insurance policy on me herself.

So I was like, fine.

Obviously it is probably not going to cost us that much.
And for a few dollars a month, I do not mind getting it.
Just for peace of mind.
To make her happy.

Because happiness and peace of mind is a lot.

If it costs me anywhere from like $8 to $20 a month, it is worth it.
Happy wife, happy life.

02:10 - What The Insurance Companies Said

So I did go online and I filled out questionnaires on a few different sites, and I was extremely honest about everything.

I did not hold back.
Debts, assets, income.
Extremely honest.

And two of the insurance companies actually came back and told me:

Based on your situation, we do not recommend getting life insurance.

Which you almost never hear from any insurance company.

Usually they are happy to sell you anything.
They will take your money.

And even the other one came back and offered a small plan.
It also said the same thing:

Based on your situation, we do not see a need for it.
But if you want a small plan to help cover funeral costs and unexpected expenses, this is what we would offer.

So I took screenshots of this and I sent it to my wife.

And I have not heard anything since.

03:00 - We Used To Have It

But the funny thing about it is, I do not know if she forgets or her parents forget, but we actually used to have life insurance.

A fairly large policy.

But it was back when it made sense.

We had more than one mortgage because we had rental properties and were just starting out in that game.
We had a brand new house that we lived in.
We had very young kids.
My wife was not working.

We had lots of debt.
Credit cards.
Lines of credit.
Mortgages.
New car debt too.

03:40 - Why It Made Sense Then

Also at the same time, because the kids were young, my wife was not working, and I was self-employed and flying out every Monday and flying home every Friday basically.

I was on the road consulting with companies.

So I could be in any city at any time during the week.
Bad weather.
Flying.
Getting to strange places.

This was before iPhone, so I had to print out my directions, get off a plane, and try to find my way.

I could end up in the wrong part of town.
It could be a snowstorm in a place that I am not familiar with.
I might get stuck somewhere.

You do not hear about planes too often, but God forbid, you never know.

So a lot of things could have gone wrong.

And my family was in a situation where if something did happen to me, she needed to have that insurance.

It made perfect sense to have a plan in case something went wrong that would remove the stress of having to worry about the finances, at least for a certain amount of time.

Because at that stage of our lives, with young kids, her not working, and all the debt, she would not have been able to survive on her own financially.

So that is when it made perfect sense.

04:50 - Life Changes

But life changes.

Time goes on.
The kids get older.
My kids are now in their 20s.
They basically take care of themselves.

Debt disappears.

Obviously there is always some small amount of debt here and there, but it is groceries, a trip you just went on, something you pay off.

It is not this massive debt sitting over your head that you are trying to chip away at.

We do not have that in our lives anymore.

Our savings are built up.
Our retirement funds are built up.

That is a big part of this entire channel.
Slow builds.
Investing.
Finances.

So over time, eventually what happens is you realize the thing that you were buying insurance to cover, you replaced it on your own.

You do not need the insurance anymore.

At this point, I would rather take the $20 or $50 a month it would cost me and buy some shares and build up my own personal investments and add to my dividend payouts.

To me, that makes more sense.

06:00 - The Question I Keep Coming Back To

So I keep coming back to the same question that I try to get her to answer:

If I died tomorrow, what problem would actually exist, and what do we need to cover it?

And in our situation:

She has a job.
We have investments.
She has her own.
I have mine.
We do not owe anything on our home.
It is maintenance mode.

We have a rental property.
We could sell it.
But it is also being rented at the moment, so there is income from that and it is an asset building on its own.

We do not have any major debt.

We did go on a vacation.
One of my kids has one semester left in school, so we help out with that.
But again, it is not something that is breaking the bank for us.

So we do not really have the same financial risk anymore.

If something did happen to me, she is taken care of by the things that we put away and by the things we did to get ourselves into this situation.

07:05 - What Insurance Is Actually For

And I think sometimes people misunderstand what insurance is actually meant to do.

It is supposed to protect against those big risks.

The things that, if something happened to one person in a relationship or family, would financially devastate everyone else and leave them in a bad place.

Possible bankruptcy.
Struggling.
Stress.

Sometimes people start insuring things they do not really need insurance on.

07:30 - The Car, Loan, and Mortgage Insurance Problem

The newest one, at least that I know of, is that when you buy a car now, you can insure the car payment itself.

Same with line of credit insurance.
Same with the mortgage insurance the bank offers you.

It is just an extra monthly payment so that if something happened to the person buying the car, the payments are paid off.

But the problem with those checkboxes is they only pay off what is remaining.

So if you get down to the last payment and you only owe $1,000, and something happens, well, you paid all that money month over month and they are only going to clear the debt.

So basically you paid all that money for $1,000.

Sure, there is some peace of mind along with paying every month.

But when you compare that to an actual life insurance policy, you pay the same amount every single month and if something did happen, you get the amount that you agreed to at the beginning of the term.

So if you had a car and you owed $25,000 on it, and you were paying the car company $10 a month for that insurance, then at the end of it, if there is no money left on the car, you just walk away with a car.
That is basically it.
You do not get any money.

Whereas if you only owed $1,000 on the car and something happened and you had a life insurance policy, you would get $25,000.

You put $1,000 on the car, you own the car, and you still have $24,000.

So there is a big difference between a lump sum policy and insurance attached to a product.

08:50 - How People Get Overinsured

And I think this is where a lot of people become overinsured, almost by accident.

Maybe they already have life insurance or some kind of policy somewhere, and that policy is already big enough to cover quite a bit of the expenses or things that might come up.

But then they go buy the car.
Or take out the loan.
Or get the mortgage.

And the checkbox is there.

Checking that box gives a feeling of relief.
A feeling of safety.

And that is why they do it right then in the moment.

Because they do not want to take the time to reevaluate their situation.

But in most cases, you probably are already covered, or maybe it is something you do not need to insure at all.

It is obviously not ideal to deal with trying to sell a car after someone passes away, but in most cases you could offload the car pretty quickly.

In the case of a property, property usually goes up in value, especially if it is something you live in or something that you take care of.

If you are the kind of person who is looking into life insurance, there is a good chance you take care of your home.

So there is a good chance that place is worth more now than when you began your mortgage or loan against it.

So having insurance that just pays off the line of credit probably is not the best case.

You are usually better off getting a larger lump sum policy if you actually need coverage at all.

10:10 - Reflection

Insurance is a very powerful tool, but it works best when it is solving a specific problem.

Otherwise it can quietly turn into something else.
Just another monthly payment.

And I think that is what made this whole situation interesting to me.

Because early in my life, life insurance solved a very real problem.

But when I sat down and looked at our situation today, I realized that problem does not exist anymore.

And that is something we do not talk about very often with money.

A lot of financial decisions are temporary, but they are also emotional.

A lot of times they make perfect sense in one stage of your life, and then quietly stop making sense.

Life changes.

And for me, life insurance was one of those decisions we did not need anymore.

Back then it solved the problem.
But today, after years of building assets and building stability, the problem it was covering is not there now.

11:15 - The Slow Builds Reflection

And I think that is something interesting about building slowly and the purpose of this channel.

If you keep paying attention to your finances over time, you start to notice that some of the protections you needed early on in your life eventually get replaced by the things you built.

Your savings.
Your investments.
Your assets.

And one day you realize something a little strange and exciting.

The thing insurance was meant to replace is the thing you already have.

You built it yourself.

And that might actually be one of the quiet milestones of financial independence.

Not when you can buy more protection, but when you realize you probably do not need it.

12:00 - Ending / Question

And I am curious about something.

Have you ever had a financial decision that made perfect sense early in your life, but later on you realized it did not really apply to you anymore?

How hard was it to cancel a policy or call up your bank to remove the mortgage insurance or line-of-credit insurance?

Was it a big decision?

Have you gone back and looked at those things to ask:

Has my life changed?
Is this something I could possibly go without?

Because that seems to happen more than people talk about.

And I am pretty sure there are a lot of overinsured people out there who are probably putting money in places that would be better used elsewhere.

Even if it is just going out for a date night, a movie, an extra coffee, or something small that improves life now.

That might be better than giving money to an insurance company for something you may not actually need.

Thanks for watching, and let me know what you think.
I look forward to the comments.