Which Insurance Do You Need in Retirement?

As part of thorough retirement planning, men 50 and over need to evaluate how much and what type of insurance you need to carry into retirement. We have different needs than someone in their 20s that might be starting a family. Apparently, our lives aren’t as risky, at least according to the actuarial (HA!) and we should own that reward. It makes little sense to overpay for coverage yet equally you don’t want to be under-covered. We can help with our blog: Which Insurance Do You Need in Retirement?

What Types of Insurance Do I need In Retirement?

Every person/couple will differ, but consider each of the types:

• Life insurance – Chances are you’ve kept a life insurance plan active for most of your professional life, possibly two if your spouse worked, or you had a personal and employer sponsored option. Still, you may not need as much as you once needed as a young couple with a family, but coverage may still be crucial.
• Homeowner’s insurance – Even if you own your home outright, you’ll need to protect that investment. Homeowner’s insurance protects you financially should your home experience damage or experience a total loss. The last thing you want is to foot the bill for flood damage or to rebuild a burnt down home.
• Medical insurance – If you retire before age 65, you may need COBRA coverage from your employer or to purchase private insurance from the marketplace. Even if you are of retirement age (65 years old), you may still want supplemental medical insurance. Medicare only covers a portion of your medical expenses. As you age, your medical expenses may become one of your largest expenses, so any insurance that helps offset the cost may help.
• Car Insurance – The law requires you to carry liability insurance in order to drive, but if you drive anything but a ‘beater’ you’ll also want comprehensive and collision insurance to protect you financially should anything happen to your car.
• Long-term Care insurance – Retirement planning may need to forecast for the next 20 to 30 years. Are you covered if you need home nursing or assisted living? Long-term care insurance can help offset those expenses.

How Much Life Insurance Do We Need?

How much insurance you need depends on your circumstances, and the right amount of life insurance may be one of your more complicated decisions. Most of the resources we found covered these questions/scenarios:

• Assess your net worth and forecast out to retirement. Is your policy less than or equal to your payout? If your beneficiaries are left with debt or final expenses, you may need to keep a short-term policy until you can balance that out.
• Are you taking a mortgage(s) into your retirement? If so, and if you pass before it is paid off, what is the future obligation to your survivors?
• Are you expected to keep major expenses, such as caring for children or grandchildren, into retirement? If so, what would be the impact if your income suddenly disappears?

You may not need life insurance if your finances are in order and you have enough retirement income set up that keeps your family set upon your passing. If you aren’t mortgage-free, still paying for college, or have children at home, keep your life insurance active. Remember, though, that life insurance gets more expensive as you age, and some short-term policies may not be available once you reach your 60s. (Source)

Should You Reassess Homeowner’s Insurance?

Even if you can cover a complete loss of a home and contents, you shouldn’t give up homeowner’s insurance in retirement. (Talk with your insurance provider, as you may be able to make some changes.) Regardless of whether you have a mortgage payment, homeowner’s insurance covers you against damages and losses to your home and offers varying forms of liability protection. Any of these can deplete your retirement savings should you go through a disaster of some sort.

This doesn’t mean you have to endure higher premiums into retirement, follow a few tips to reduce your overall homeowner’s insurance obligation:

• Look to a higher deductible to reduce your premium.
• Check to see what discounts they give for homeowner outlays such as security systems, monitoring systems (CO2, smoke), weather protection such as shutters, or any additional modifications meant to safeguard your investment.
• See if your insurance provider offers discounts for multiple polices and discounts for paying off your mortgage.
• Don’t forget to let your insurance company know that you’re retired (when you do). They often give retirees discounts because they are home more often, which lowers the risk of a claim.
• (And my favorite) Remind them you are a customer and they’re not the only game in town. It never hurts to let your insurance agent know they still need to compete for your business to help get a better deal.

Are Car Insurance Rates Better?

Obviously, you’ll still need auto insurance if you’ll be driving in your retirement, but fortunately, retirees often qualify for a variety of car insurance discounts that may include:

• Low mileage discount – Since you’re no longer driving to and from work, you may drive fewer miles which may lower your premiums.
• Retiree discount – Many insurance companies give retirees a lower rate because they no longer commute. Driving during rush hour to and from work puts you at higher risk of an accident. Without that commute, you are cheaper to insure.
• Find other discounts – You may also get discounts if you take a defensive driving course, install usage-based technology, or increase your deductible.

Do You Need Health Insurance?

Regarding which insurance do you need in retirement, health insurance is a definite. As it relates to retirement planning, healthcare can be a major expense and the political landscape may change drastically, so make sure you stay informed! As we said in one of our earlier blogs on Medicare, a couple can expect to spend close to $280,000 on medical expenses in retirement, and with some restrictions.

Before you reach retirement and if you haven’t done so yet, speak with an insurance carrier and talk about some planning options.

• Do you have employer-based retirement health care? What are the conditions and coverage?
• If you retire before you are eligible for Medicare, did you consider the Health Insurance Marketplace through HealthCare.Gov?
• Are you eligible for Health Savings Accounts (if you are a part of or can enroll in a high deductible health plan).
• If feasible in your planning, maybe Long-Term Care Insurance can be a possibility to reduce long-term care costs.

Consider Long-Term Care Insurance (LTC)

One thing to remember about Medicare is that it doesn’t cover long-term care and if you end up in a living assisted facility, the cost of a private room can exceed $100,000 a year. (Source) If you think you’ll need constant care because of chronic disability (more than family can provide), adult daycare or full-time assisted living, then LTC insurance may be an alternative.

But if you are going to explore this insurance as part of your retirement planning, start early. A 55-year-old couple can expect premiums between $3000 – $6000 a year. (Source) These programs carry tax benefits, so look over all your selections carefully and start early to get the most affordable rates!

Final Thoughts

Give your insurance needs careful thought long before retirement. While things will change, the need for financial protection, especially for your loved ones, will never go away. Talk with an insurance expert and include them in your retirement planning long before you need it and you’ll be in the best position if you need to make a claim.

We hope that you’ve found some useful information with our piece; Which Insurance Do You Need in Retirement? As always, if you don’t see something here you want us to cover, feel free to reach out to us directly through our Contact page or leave a comment below. Happy retirement planning! ~ Glen.