Rethink Your Insurance
Here is some advice on three kinds of coverage you probably need after age 60 and three you may not
When it comes to insurance, most people are on autopilot; once in place, they just keep paying the premium.
Reviewing and reconsidering all of your insurance every few years is a financially smart practice. Requesting quotes from competitors every few years can save money and help you to understand your policies better.
This is particularly important after you turn 60, when changing circumstances make it worth your while to reconsider what kinds of insurance you no longer need and maybe some new types you should look at.
If insurance seems overwhelming or too dry to bother with, think of the topic in terms of saving money. As you head into retirement, the more money you save, the more you have for fun years.
Why Now: Understand Your Risks
The risks you want to cover with insurance are different when you are 60 than they were when you were 35 — perhaps your children are grown, or your mortgage is paid off, so life insurance is less important than it was 25 years ago. Now you might want to address risks in your future by considering long-term care (LTC) insurance. Even if you've had these policies for decades, they may not be appropriate as you age and retire.
Life Insurance
When you're older and have acquired the assets needed to pay for your burial and final estate details, you may no longer need life insurance, for example. Most life insurance premiums are age-related, so the older you are, the more it costs. Many folks are wasting money on life insurance, thinking of leaving their children money and forgetting they have other assets for their heirs.
The risks you want to cover with insurance are different when you are 60 than they were when you were 35.
Life insurance is designed to pay for the needs of your dependent children and spouse when you die. The amount that is purchased often includes enough to cover any debts you may have. If you have built considerable assets to cover all your family needs, you do not have to maintain life insurance.
As always, there are exceptions. If you have dependents who are young or unable to care for themselves, your policies may be essential to care for their lifetime needs. Or, if you have a high net worth and want to keep some of your assets intact, such as a business or property, you may want life insurance to cover the estate taxes at your death.
In either case, seek objective information from your financial planner, lawyer or accountant to understand how to designate the beneficiary of your life insurance policy to serve your purpose. For example, if you have life insurance to aid a disabled child after you are gone, you may need to designate a Special Needs Trust to be the beneficiary.
Disability Insurance
Disability is typically an employee benefit; therefore, the coverage comes with your employment. Those who are self-employed or professionals, like doctors and lawyers, often have their own policies. If you are paying for disability insurance, this is the time to reconsider the details. Most policies only pay until age 62 or 65.
Consider what would happen if you had a disability. Would you be able to withdraw from your retirement plans?
Consider what would happen if you had a disability. Would you be able to withdraw from your retirement plans? Do you have debt that needs to be covered? How long could you sustain your disability without drawing on Social Security retirement?
If your professional disability premiums are high, then do a cost analysis of what it covers and for how long. Could you cover your disability needs without the policy? Or are the premiums so high at 61 that the 18 months of coverage you would receive are way overpriced. Even if you choose to keep your policy, be sure to set a reminder about reviewing it each year, especially as your retirement comes closer.
Long-Term Care Insurance (LTC)
Do you need LTC insurance? There is not one right answer for everyone, and different professionals have varying perspectives. Typically, though, LTC annual premiums are too expensive for those who need it most because they do not have the assets for annual payments for decades to come.
LTC is much talked about as essential for aging population. Some companies even provide policies as an employee benefit, which you may be able to take with you when you retire if you are willing to pay for it yourself.
When you are healthy and young, these polices cost less. As you age, even if you have a policy in place, the premiums rise consistently, putting a dent in retirement income. There is so much to know and understand before buying LTC.
First understand if LTC insurance is necessary for your situation. This involves a deep dive into your financial and personal situation. Clarify your details by reviewing the following before making a final decision by reviewing your assets, needs and goals.
If you do decide to buy this insurance, do not shop solely for the best price. This product is not just about costs, it is also about benefits. Do not make this an emotional choice based on aging or pressured selling of an insurance agent. Before you choose a policy based on the assumption that you may need assisted living or care at home, a little research will help you learn that the Centers for Disease Control says only 7% of older Americans need help at home.
The three kinds of insurance you are likely to want are: home insurance, whether you own or rent; automobile insurance; and health insurance.
Some pre-retirement folks set up an account simply for long-term care needs in the future. By saving ahead without insurance, they feel ready to face whatever comes their way.
Three Basic Kinds of Coverage
The three kinds of insurance you are likely to want are: home insurance, whether you own or rent; automobile insurance; and health insurance. They may want to update their coverage and compare their company to others. Finally, they can adjust their deductible to make coverage more financially feasible.
Homeowner (or Renter) Insurance
No matter where you live you will need home insurance. Even if you have downsized to a condominium and are told that the homeowners association pays for condo insurance, you need your own insurance. This insurance pays for what is your property inside the condominium, including personal property and appliances along with liability.
If you decide to rent in your older years and feel you have little property or furnishings, take the time to consider if you had to replace all your clothes, furniture, kitchen utensils and appliances. These costs add up fast. Renters' insurance also can pay for a place to live if your residence is uninhabitable due to a hurricane or other disaster.
Automobile Insurance
If you own a car, you will want car insurance. This is the time to sit down with your insurance agent and review how much coverage you need. If you retire or change work habits, you are probably driving less and thus should pay less. Work from home means many people are commuting less and driving overall less, which often qualifies for a discount.
For both your home and car insurance, this is a time to reconsider your premiums and deductibles. If you have built enough assets, raising your deductible from $250 to $500 or even $1,000 will lower your premium.
However, do this cost saving move only if you have the resources to cover an insurance claim for the amount of your deductible. By taking on more of the costs of damage, the insurance company considers you less likely to make smaller claims that cost them money.
Private Health Insurance
Certainly, at age 60, you know you need private health insurance, unless you qualify for Medicare. Did you know that you need health insurance even with Medicare at age 65? There are gaps in coverage, and you are responsible for those out-of-pocket expenses.
You also need to consider the prescription medications you are on, where you live and what you can afford to pay if you fall ill.
C.D. Moriarty, CFP, is a Vermont-based financial speaker, writer and coach. She can be found at MoneyPeace.com. Read More
