How Do My Insurance Needs Change In Retirement?

Preserving your assets requires more than a thoughtful investment strategy. You also need insurance to protect you against an array of financial risks, especially health care.

While few people enjoy analyzing and buying insurance, the right coverage can help free you to manage life’s challenges without as much financial concern. As your career, family, and health change, your insurance needs will, too.

Just remember: New circumstances often call for new coverage. So, while you explore the freedom and adventure that retirement can bring, don’t forget to make sure you have insurance to help support the life you desire.

AUTO

You may be able to reduce your auto insurance rates by checking that you have the right people on your policy and are using any new discounts available to you now. If your adult children are still on your policy, you should evaluate whether this choice still makes sense financially. In addition, make sure you are taking advantage of all available discounts, which may include reduced prices if you:[1]

Are over a certain age, often 50
Drive fewer miles
Take a defensive driving course
Retired from the military
Are a member of senior organizations, like AARP
Driving a car that is more affordable to insure

HOME

Even though you may have paid off your mortgage — mitigating your lender’s requirement to have homeowners insurance — keeping this coverage is smart for many reasons. Protecting yourself from property loss and exposure to personal liability is important, even without a mortgage.

Now is an ideal time to review your policy and the cost of replacing your home and belongings, as their value may have increased over the years. Also, consider an umbrella policy, which can help protect against the financial risk of personal liability.

The good news is that homeowners insurance is often less expensive for people over 50. Because older adults are less likely to file expensive claims, you could find a new premium that is lower than what you’re paying now. So, take the time to shop around and see if you can find coverage that suits your needs — and saves you money.[2]

HEALTH

As you grow older and retire, making the right health insurance choices is critical. Depending on your current age and work status, your choices differ:

Medicare: When you turn 65, you become eligible for Medicare, which includes options for hospital and medical insurances, as well as prescription drug coverage.[3]3 Once you enroll in Medicare, you should consider purchasing Part D, the Medicare Prescription Drug Plan, which can help you save money on prescriptions.

To pay for medical care not covered by Medicare, you may want to consider other Medigap insurance plans available through private insurance companies. You should sign up for these plans within six months of turning 65, since you won’t need a health exam during this period.

Gap Coverage: If you retire before age 65, you will need coverage to bridge the gap between when you retire and when Medicare begins. If your spouse continues to work, consider joining their plan, if you’re not already on it. However, you may need to wait until their employer’s annual enrollment period, so make sure you prepare for this timing.

You can also purchase coverage through a private insurer, the public platform at HealthCare. gov, or your state’s program.

DISABILITY

Disability insurance is important, especially if your family depends on the income from your work. When you stop working, however, you should consider canceling your policy, since you’ll no longer need it.

LIFE

When you were raising a family, financial obligations made life insurance a critical expense. While you may not have dependent children anymore, that doesn’t mean you should immediately cancel your policy. In fact, life insurance can help to protect your retirement plan and legacy, so analyzing its role in your financial life is essential.[4]

Before making any decisions about your coverage, complete these two steps:

Analyze how your death would affect your spouse’s lifestyle — especially if they outlive you by decades.
Consider how a life insurance policy could help pay for estate taxes or provide a financial legacy for future generations.

Once you better understand how life insurance supports your family’s needs and your personal goals, you can decide whether keeping this coverage makes sense.

EXTENDED CARE

For some people, extended care insurance is a priority during this stage of life. With the expense of children in the rearview mirror, you can now turn your focus to buying protection against potentially the most significant health care expense you are likely to face in retirement.

Extended care insurance covers treatment for chronic, long-lasting illnesses and regular care (from in-home care to a nursing home). Since Medicare does not cover most of these costs, extended care insurance coverage is critically important.

[1] https://www.dmv.org/insurance/senior-driver-discounts.php

[2] https://www.uswitch.com/home-insurance/over-50s-home-insurance/

[3] https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/whats-medicare

[4] https://lifehappens.org/insurance-overview/insurance-for-empty-nesters-retirees/