What if someone can not obtain life insurance?

ESPlanner recommends life insurance when needed. I have two questions:
1. What if a person can not obtain life insurance due to medical problems? Would it be possible to have a election to turn off the life insurance computation?
2. When life insurance is recommended, the amount recommended changes over time (dramatically). Term life insurance generally has two characteristics, a fixed death benefit and a fixed term. How should the reality of the marketplace for term life insurance be reconciled with the variable recommendation?


dan royer's picture

We're working on some alternative set ups that might help, but for now you can eliminate life insurance by changing survivors's living standard to a negative number (see ESTATE area). Or you can offset the cost by giving yourself special receipts in the same amount as the insurance but that's awkward.

Yes, the software is being technical showing you the precise amount needed for each year to supply the survivor with the same living standard. Most, in practice, would simply over-insure for few years, buying a policy that covered the early years at least.

In the same vein the software is recommending that I drop my life insurance at age 67, and then get a smaller amount of life insurance (250k) at age 77. Since I could be uninsurable at that age this doesn't sound like a practical idea.

How can I get the software to model keeping the 250k of insurance even though I might not need it temporarily?

dan royer's picture

Well, remember, it's not the recommendation amount that you see on the Annual Suggestions page that actually makes any difference to the calculated discretionary spending / living standard, it's the amount of the premium you see in the total spending report that matters. So although you can't actually populate the insurance recommendation amount you can enter the amount of your premiums as a series of annual "special expenditures" for the years you will be paying those premiums. Of course you don't have to do that--you could also just view those premiums as part of your discretionary spending if they are not large amounts I suppose.

Hmm. I'm not so much worried about the premium amounts as I am about the survivor reports. Assuming I'm the first to die my wife's standard of living will certainly be affected by the amount of insurance that I happen to be carrying when that happens.

All of this comes about because I am trying to figure out whether I might be carrying too much insurance, and it would make more sense to take out the cash value, and invest it.

dan royer's picture

Yes, OK, so in that regard the program works well. It's evaluating your insurance needs in each year and showing the recommended amount you would need in that year for your survivor to have the same per-adult living standard as she had with you alive. Of course we don't buy term insurance in amounts that vary from one year to the next, but you can see in the recommended amounts column whether you have at least that much coverage for those year.

You can then verify the survivor's living standard by picking a year when you both die and adding survivor reports to your reports when you create a report and see the survivors' living standards.

Using contingency planning, you can fine-tune that by indicating, for example, that a survivor would downsize a home or return to work or quit work etc.

OK. But why don't I see the life insurance value coming in as income on the survivor report, or am I just missing it. By the way my wife, and I were both born in the same year, and I have set our maximum age at 100 for both of us so I don't think the life insurance would kick in other than in the survivor report

dan royer's picture

The life insurance will only come in for those years that the program is recommending it. The program is ignoring whatever life insurance you entered you had in the Estate area. But if the program indicates that you need 500K of life insurance in the year 2020 and you create a survivor report where you model dying in 2020 you'll see that your survivor has an extra 500K in regular assets than she otherwise would have had creating a per-adult living standard that is at least equal to what he or she had when both were alive.

I don't see it. The program is recommending life insurance in the annual suggestions for the next 15 years. As I understand the contingency planning and the survivor report it assumes what will happen if I die in any particular year in the future. I would expect to see a jump in assets in each year of the survivor report, but I only see a jump in assets in the very first year of the survivor report.

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