Reevaluating Your Insurance Needs After Retirement

24 Mar

Once you hit retirement, everything changes. You may have a new schedule, a new home and location as well as time to pursue your passions instead of worrying about getting to work. One other major change that you should absolutely take care of is your insurance coverage. 

While your new lifestyle may make some of your insurance policies unnecessary, you should give it some thought before dumping your insurance coverage. There are some policies that retired people should absolutely have in place. 

Here are a few tips to consider when reevaluating your insurance needs after retirement:

Is Life Insurance Necessary Retirement?

In most cases there is no right or wrong answer, it really depends on your retirement savings and how comfortable you are cancelling or selling the policy. While the main goal of life insurance is to replace lost income for your surviving family, you may want to keep your policy even after retirement. 

A life insurance policy can be a useful when you look at wealth transfer to your kids or other beneficiaries. If your kids or other non-spousal beneficiaries will be inheriting an individual retirement account it will need to be cashed out within 10 years and that can lead to a major tax bill. The payout from a life insurance policy can help cover some of that expense. 

There are a number of other ways to use the benefits of a life insurance policy instead of replacing your lost income. Here are just a few to consider:

  • Name a favorite charity as the beneficiary of your policy
  • Use it to pay off debt or a child’s debt
  • Can be used as an inheritance
  • Provide your spouse with some additional income after your death
  • Your policy may provide living benefits that can be used if you suffer from terminal illness or end up needing long term care

Policies Seniors Must Have

There are a couple of policies that every senior should be carrying:

Medical Insurance: This is the number one insurance coverage that every senior should be carrying. Health care costs tend to go up as you age which makes health insurance an absolute necessary. While your premium can be pricey as you get older, health insurance can be a financial lifesaver if you end up with a serious long-term disease or disability. 

The majority of seniors age 65 and older are eligible for Medicare. If you are still working at this age, you may still have insurance through your workplace and if that offers better benefits you may want to consider delaying the move to Medicare until you are fully retired. 

In general Medicare doesn’t cover 100 percent of your medical costs, so you should consider a supplemental plan to fill in the gaps. Medigap and Part D coverage will help cover the cost of procedures that are not fully covered by Medicare. You can also purchase a Medicare Advantage Plan from a private insurance company to close coverage gaps. 

Homeowners or Renters Insurance

While it is possible to dump homeowners insurance if you have paid off your mortgage, it is almost never a good idea unless you can easily afford to rebuild your home and replace all of your possessions. 

Homeowners and renter’s insurance helps protect you against damage or losses on your property. Homeowners insurance typically comes with coverage caps on expensive possessions, if you have valuable jewelry, art collections or other high-priced property you may need a rider to fully protect your expensive possessions.

If you have a mortgage on your home, your lender will require you to carry homeowners insurance. Once the home is paid off it is possible to drop homeowners coverage. However, this can be an expensive mistake, if your home is seriously damaged or destroyed You will be on the hook for all expenses, this means that all of your savings and other assets are at risk. 

In addition to protecting your home, homeowners insurance also offers liability coverage which is an absolute necessity. Liability insurance will help cover expenses related to medical bills or lawsuits if someone is injured on your property. Accidents can happen at any age, but the elderly are more prone to falls and slips so liability coverage should be one of your top priorities.

Check the liability limits of your policy and if you feel you may need more coverage consider an umbrella policy. Umbrella policies are sold in $1,000,000 increments and are very affordable. 

Flood and Earthquake Insurance

If your retirement plans involve moving to a different location, you may need to consider flood or earthquake insurance depending on where you are moving. A standard homeowners policy does not offer any coverage for flood or earthquake damage. 

If you are moving to a flood prone area or your new house is located in a high-risk flood plain you will need flood insurance to fully protect your home. Flood insurance is sold through the National Flood Insurance Program (NFIP) or through private insurance companies. There are coverage caps with NFIP policies so you may need to supplement your coverage with a private policy.

The same can be said for earthquake coverage. if you are moving to an earthquake prone area you will need to purchase an earthquake policy. Earthquake insurance can be expensive but if your home is severely damaged or destroyed in an earthquake it can be a financial lifesaver.  

Other Coverages to Consider

While health and homeowners insurance are a necessity there are a number of other insurance products you should consider. Here are just a few:

  • Travel Insurance: If you plan on spending a lot of time out on the road after you retire you may want to consider a comprehensive travel insurance policy. Travel insurance usually offers features such as emergency medical coverage as well as medical evacuation in the event you are seriously ill and need to be evacuated home. Trip delay or cancellation insurance usually comes with these types of policies as well.
  • Car Insurance: Car insurance is a required coverage in almost every state. If you are still driving or even own a car you should absolutely be carrying the proper amount of car insurance. even if you rarely drive, car insurance is a necessity.  State required minimums are rarely sufficient to fully protect you, talk to your insurance agent to determine the right coverage levels for your situation.
  • Long-Term Care Insurance: Medicare insurance will not cover the cost of ongoing care in a nursing home or assisted living facility. Medicaid will not pay for this type of care unless the person has depleted all of their assets, which makes long term care insurance a great idea if you feel you will end up in one of these facilities. 

While these policies are typically expensive the cost will be a drop in a bucket compared to paying for seven or eight years in a long-term care facility. 

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