Jacob at Early Retirement Extreme asked me why I have life insurance after I posted my $700/m budget. The reasons I have life insurance are perfect examples of how emotional money can be. The easy answer is that, no, I don't need life insurance. I have no dependents except a cat.
Here's why I bought it:
I have two 30 year term policies, one for $100k and the other for $500k. I bought the $100k policy because I was debt free, didn't have any other financial goals at the time, and I thought that maybe I would get married and have kids in the next 5 years and the premiums would be cheaper if I got it when I was young and healthy. 30 years would be plenty of time for the kids to grow up and by then I would have enough money anyway and wouldn't need life insurance. That policy costs $11/m.
Then, for some reason I can't even remember(it probably had to do with the fact that my sister died young and left 2 children without life insurance) I wanted MORE insurance so I got the $500k policy at $36/m to replace the $100k but I never cancelled the $100k policy. I pay the yearly premium for the $100k policy and every time I do it I think I should cancel it, but I don't. The $36 premium comes out of my checking account automatically so I don't even think about it. That's $47 total a month!
So, 5 years later I am not married and I don't have kids. I have thought about a trust fund for the cat but how much money does she really need? If she lives 10 years more (she is 8) I think $10,000 could keep her in the lifestyle to which she has become accustomed. I have also thought that it would be cool to leave behind college funds for all of the nieces and nephews. But really I would rather be alive than leave them money. They'd probably take it for granted anyway.
What do you think? Should I cancel both policies? I need affirmation!!! :)