Retirement is when everything changes. Retirees may end up with new schedules, new hobbies and even new homes. In the midst of all these exciting changes, don't overlook the mundane: your insurance coverage.
With a new season of life at hand, old policies may no longer meet your needs. However, seniors should be cautious about canceling their policies. You need to consider your future insurability as well as your individual circumstances and life goals. These guidelines can help determine which policies are essential and which could be optional.
Do You Need Life Insurance After You Retire?
Although the main purpose of life insurance is to replace lost income, retirees may want to keep their coverage. Most non-spousal beneficiaries who inherit an individual retirement account will need to cash out that account within 10 years, which could result in a sizable tax bill. For instance, a favorite charity may be named the beneficiary of a policy.
Life insurance can also be used to pay off debt, leave an inheritance or provide for a spouse in the event a pension doesn't include survivor benefits. What's more, policies may offer living benefits that can be used in the event of a terminal illness or the need for long-term care.
2 Must-Have Policies for Seniors The following two types of insurance are universally necessary for seniors.
The most obvious insurance retirees need to maintain is health insurance. The increasing cost of health care that comes with advanced age is a major reason to buy medical insurance.
Most seniors age 65 and older are eligible for Medicare. Seniors who are still working may have benefits through their job, and it can make sense to use your workplace plan instead if its benefits are better.
Retirees should consider purchasing a supplemental plan to help pay for services not fully covered by Original Medicare. Using a Medicare Advantage Plan, offered by private insurers, is another way to fill in coverage gaps.
Medicare imposes a late enrollment penalty on those who don't sign up for Medicare Part B and Part D when initially eligible, but that penalty may not apply if someone has group coverage through the workplace. Seniors should confirm whether the penalty will be waived before declining to enroll at age 65. Our team at RCB & Associates can help you avoid these mistakes by working with you before your 65th birthday.
Homeowners or Renters Insurance
These policies insure against the loss of property and possessions and also provide liability coverage. Seniors who have valuable jewelry, art or other items may need to add a rider to their policy to fully insure these things.
Mortgage lenders require homeowners to maintain coverage, but once the loan is paid off, it can be tempting to save money by canceling the policy. That could be a costly mistake. Retirees should also be aware of how their coverage needs change in retirement. Those who plan to add a pool or entertain family and friends regularly in their home may want to increase their liability limits.
Meanwhile, moving to a different geographic location may mean new insurance is needed for potential disasters such as earthquakes or flooding.
4 Options That May Be Smart Beyond health insurance and homeowner coverage, there are a number of other insurance products that could be helpful to seniors. Many retirees will find one or more of the following insurance policies are right for them.
Retirees who plan to travel extensively may want to purchase a comprehensive travel insurance product. Look for a policy that includes features such as emergency medical and medical evacuation services along with trip delay or cancellation insurance.
Like health insurance, car insurance is legally mandated in almost every state. Any senior who is still driving and owns a vehicle should insure it properly.
An umbrella policy provides additional liability coverage above and beyond what's included in homeowner and car insurance. You don't need to be affluent to find these policies beneficial either. You might be sitting on a not-for-profit board and that position or other volunteer activities could put you at risk for a liability claim and warrant added insurance coverage.
Long-Term Care Insurance
Medicare won't pay for ongoing custodial care in a nursing home or assisted living facility, and Medicaid coverage will only kick in once someone has depleted almost all their assets. However, long-term care insurance may pay for care either in a facility or in a person's home.
For those who worry about purchasing insurance they may never need, hybrid life insurance/long-term care policies will pay out a death benefit to beneficiaries if a person doesn't exhaust their coverage limits before passing away.
Our best advice is to meet with your insurance agent prior to retirement, and prior to your 65th birthday, and discuss your options and dates to be aware of. Our agents at RCB & Associates would be happy to meet with you and help you prepare for a wonderful retirement.