What Insurance Do You Need As A Retiree? (And The Policies You Can Drop)

Risk management is an essential component of your retirement plan. In retirement, you want to properly protect the assets that you’ve worked so hard to secure. 

Insurance is an important strategy for preserving your savings and protecting your wealth. From homeowners insurance to medical insurance and everything in between, insurance can help you to weather misfortune without depleting your assets.

That said, your insurance needs will likely be different in retirement. There may be policies that don’t serve you anymore or are no longer relevant. If so, you don’t want to be on the hook for a costly monthly premium for an insurance policy that doesn’t make sense for you. 

In this article, we’ll explore the type of insurance that are must-haves for retirees, as well as what coverage can likely be left behind.

What Policies Should Retirees Consider Keeping?

There are a few types of insurance policies that retirees should invest in, including health insurance, homeowners or renters insurance, car insurance, and long-term care insurance.

Health Insurance

Health insurance is one of the main types of insurance that is critical for retirees. With healthcare costs on the rise, health insurance plays a key role in ensuring that medical costs don’t unexpectedly wipe out your savings.

Retirees who are 65 or older qualify for Medicare. That said, Medicare doesn’t cover all costs, so you may need additional coverage. Medicare Part A often has no premium and comes with a $1,485 annual deductible. Medicare Part B has an average premium of $148.50, plus an additional cost of 20% of all Medicare-approved procedures.

In some cases, retirees may need to purchase additional insurance. This can include a Medicare Advantage plan or supplement plan, prescription drug coverage, or Medicare Part D.

Homeowners or Renters Insurance

For many retirees, their home is their most valuable possession. With this in mind, it’s important to protect where you live by making sure it’s covered by a robust homeowners insurance policy. You’ll likely need to add additional insurance coverage if you live on the water or have a beach home or condo.

Even if you don’t own a home, a renters insurance policy can help you to protect valuable personal property. Renters insurance policies are often much more affordable than homeowners insurance policies since they cover only the interior of an apartment and not the exterior structure.

Car Insurance

If you drive a car, car insurance is required in most states. Not only can car insurance protect your finances in the case of an accident, but it can also help to ensure that you can afford car repairs. You can also look into purchasing additional car insurance coverage beyond the minimum requirements for your state. Comprehensive and collision coverage can come in especially handy since they protect your car in the case of accident or theft.  For individuals who drive an older car, it may not be necessary, and even expensive, to carry collision insurance.

Long-Term Care Insurance

Since long-term care isn’t covered by Medicare, it’s a good idea to purchase additional long-term care coverage. In South Carolina, the annual cost for long-term care ranged from $47,850 to $94,327

With costs expected to rise even further over the next several decades, a robust long-term care insurance policy can help to ensure that you are comfortable and well-cared for in the future without burning through your savings.

Policies You Can Likely End

Your insurance needs won’t be the same in retirement as they were when you were still working. Here are a few policies that you can probably stop paying for.

Life Insurance

If you don’t have young children or other dependents who rely on your income, you may want to consider going without life insurance. You should ensure that your spouse also has sufficient income should you pass away. If you have high debts, you may also want to consider keeping the policies until your loved ones wouldn’t be burdened by the debt any longer.

Whether or not you still need life insurance also depends on your specific policy. Term life insurance expires after a specific period, while whole or universal life insurance lasts until your passing. Permanent life insurance is often used in estate planning to transfer wealth and inheritances to the next generation, so you wouldn’t necessarily want to terminate that policy.

It all depends on your needs, policy specifications, and estate plan.

Disability Insurance

Disability insurance is designed to cover benefits if you’re unable to earn an income due to disability. For retirees who are no longer working, this policy is likely redundant. You should consider repurposing the funds from your disability insurance policy to a more relevant insurance need, like health insurance or long-term care insurance.

Extra Policies to Consider

There are a few extra policies you might want to consider adding to your insurance repertoire in retirement, including travel insurance and umbrella insurance coverage.

Travel Insurance

If you plan on traveling the world in your retirement, then travel insurance is a must. Travel insurance can often cover trip cancellation or interruption, medical coverage while traveling, emergency evacuation coverage, and coverage for your baggage and personal belongings.

Umbrella Coverage

Personal liability is still an important factor to consider in retirement. Umbrella policies cover beyond what a typical home or auto insurance policy will pay, which can offer you additional protection in the event of an accident.

Before Retirement, Conduct an Insurance Review

Your policies, coverage details, and insurance needs will differ in retirement. It’s critical to build a plan that properly protects your assets while minimizing the amount you spend on insurance premiums.

If you’re nearing retirement and aren’t sure what insurance coverage you need, we can help. Get in touch with us today to learn more about our comprehensive financial planning services.

Insurance, Retirement Planning
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