Hold, I think your decision-making here is sound. If her dad keeps hounding you it might be worth taking him out for coffee and explaining a small amount of the situation to him.

Something like "Dad-in-law, I have tried to keep you out of any discussion regarding finance at your request. However, I'd like you to understand why I am doing this. My primary goal is to make sure your grandkids have a safe and secure future. HoldsWife has shown over the years that she isn't capable of sticking to a budget and has run up more debts than I care to elaborate.

I have one life insurance policy which should see her well-supported in case I die, and the other policy is to do the same for the kids.

Thanks for showing an interest. So, how about them [fill in football team here]."