The following post is sponsored by SelectQuote, based in San Francisco. They’ve been around for over 30 years, and I had the opportunity to sit down with their CEO for an hour to talk about his business and how they’ve managed to grow for so long. 

After giving folks a heads up about a common bait and switch tactic in the life insurance industry, I was asked by a number of people why I’d waste my money on life insurance premiums if I’m financially independent. It’s a good question that merits a deep dive because many of you will face the same dilemma once your passive income can cover all your living expenses or once your net worth reaches 20X your gross income. After all, you’re one of the few who care enough about your finances to read this site!

But I’m a little surprised why the folks asking couldn’t think of the many reasons why life insurance might be necessary after reaching FIRE. I guess if you haven’t reached FIRE, don’t have a family, or have never sat down with an estate planning lawyer, it’s hard to know.

Here are some reasons why life insurance is a good idea despite being able to self insure. You can click on the audio version if you scroll to the bottom.

Now that I’m a father, one of the first things I did was call up my life insurance provider to review how much life insurance I have and go through the various term life insurance options.

I was reminded of an existing $1,000,000 term life policy that’s expiring in five years. It was taken out 10 years ago when I was thinking of getting married. I figured, given I had about $1,200,000 in mortgage debt from buying a single family house, it was best to cover such liability so my future wife wouldn’t be financially burdened if I passed.

Now I’ve got 22 years to consider before my son graduates from college. Therefore, I decided to get a quote for a $2,000,000, 25 year term life insurance policy that came out to $181/month with my existing provider. Better to lock down a quote now before anything unhealthy happens, causing my premiums to skyrocket.

Unfortunately, because of the size of the policy, I was required to get my blood drawn, piss in a cup, and do an EKG. I hate getting blood drawn. It’s frankly one of the main reasons why I didn’t want to get a $1,000,000+ policy in the first place. But life insurance isn’t for me, it’s for my family, so I proceeded.

Before I sold my house in the Marina district of San Francisco, I always had a slight worry whether it would survive the next big earthquake. The Marina district, although a highly desirable neighborhood in the north end of San Francisco, is mostly underlain by saturated silts and sands that may liquefy if another large earthquake hits.

The last big earthquake was the Loma Prieta earthquake on October 17, 1989 which killed 63 people, collapsed a section of the Bay Bridge, and caused several buildings to burn down in the Marina due to ruptured gas pipelines.

Each time I got the mandatory earthquake insurance offer in the mail, I passed because the deductible (10% of value of home) was so high and the premium ($5,000+/year) so expensive. I’d ignore the risk I was taking until I’d get the same offer in the mail the next year. I figured worst case, I’d have to spend $650,000 rebuilding a 2,300 sqft structure.

Now that I don’t own a home surrounded by liquefaction, I do feel a sense of relief that I “escaped” almost 13 years of ownership without experiencing a natural disaster. So many people who didn’t live in San Francisco constantly reminded me about the risks of earthquakes before I bought. Then after I bought, so many more people from San Francisco who didn’t/couldn’t buy a home tried to instill fear in me.

What gives folks? Can’t you just be happy for someone’s largest purchase?

As a result of all this feedback, one of my worries was having an earthquake hit while I was in the process of selling my home. Selling a home is much more stressful than buying a home. If you don’t buy a home, there is no loss except for dashed dreams. If your home falls out of contract when selling, vultures will start circling.

With devastations seeming to happen around the country every year, I’ve begun to wonder whether it would be wise to look into flood and earthquake insurance again to cover my remaining properties. My homeowner insurance policy covers fire damage, and so should yours.