Here Are the Types of Insurance You Might Need in Retirement

Here Are the Types of Insurance You Might Need in Retirement

Retirement is a time of life that is both exciting and stressful. Often, individuals face many financial hurdles before retiring, and this can continue into the later years of life.

One of the key ways to manage financial risk is by having insurance. However, the question then becomes what sort of coverage makes the most sense for you. This question can be very difficult to answer since the right choices largely depend on your situation. Taking account of your current financial situation and the events you are likely to encounter in retirement is the best way to avoid spending money on coverage you do not need or missing out on a plan that may save you a lot down the line.

The Key Insurance Policies That All Retirees Need

Virtually all retirees will need some type of insurance, so that is a good place to start. The first essential plan is medical insurance, especially given the increasing cost of health care in the United States. While you may have had insurance through an employer before retiring, you will eventually need a Medicare plan. Importantly, Medicare does not cover all medical costs, so it is important to get some supplemental coverage through Medigap or Part D coverage. You also may want to consider a Medicare Advantage Plan, which comes from private insurance, to meet the gaps in coverage. Importantly, declining Medicare Part B and Part D can come with a penalty unless you meet certain requirements, so verify before waiving enrollment.

Another essential piece of coverage is either homeowners or renters insurance. These two policies protect against loss of property at home and also offer liability coverage. Be sure you add a rider if you have particularly valuable art, jewelry, or other assets. You may be tempted to get rid of this coverage once you no longer have a mortgage or forego it if you rent, but that leaves you extremely vulnerable. Be sure you have coverage for issues unique to your geographic area, such as earthquakes or flooding, and think about how you will use the home. For example, if you have a pool, you may want more liability coverage than is standard.

Insurance Coverage That May Benefit You in Retirement

While virtually everyone needs the policies mentioned above, you may find several other types of coverage beneficial. For example, if you plan to travel a lot, then purchasing a comprehensive travel insurance plan can provide a lot of peace of mind. Be sure that the plan has emergency medical and medical evacuation coverage as well as trip delay or cancellation insurance. That way, you will not need to worry about facing major expenses related to travel. Also, if you still have a vehicle, you will likely need auto insurance, which is mandated in almost every state. Even if you live in a state without a mandate, having proper coverage is important to avoid unexpected expenses related to an accident.

Another product to consider is umbrella insurance, which offers additional liability coverage beyond what is included in homeowners and car insurance. Many people think umbrella insurance is primarily for high-net-worth individuals, but that is not always true. Think about the activities that may put you at additional risk for liability claims. For example, something as innocuous as sitting on the board of a nonprofit can increase your risk of liability claims.

You may also want to consider long-term care insurance as Medicare does not cover ongoing care in a nursing home or assisted living facility. Medicaid will not help until you have depleted almost all of your assets. Long-term care is expensive, and insurance can significantly reduce the burden. Also, some hybrid life and long-term care policies will offer a death benefit if coverage limits are not exhausted so you can recoup some of the money paid into the policy.

Determining whether to get life insurance in retirement can be tricky, however. While this policy is meant to replace lost income, it can play an important role for retirees, especially in terms of wealth transfer to future generations. Life insurance can offset the tax ramifications of inheriting wealth in other ways, so it may make sense for you. Also, some plans have a living benefit. The plans can be used to provide for a spouse or even pay off debt. However, not everyone will find themselves in need of this sort of coverage.

The Coverage You Can Forego in Retirement

One policy that many retirees have when they do not need it is disability insurance. Once you are no longer working, this sort of insurance has no benefit. Even retirees who have stopped working due to an accident or illness will find greater benefit in long-term care insurance or by relying on retirement benefits and other assets.

In retirement, it often makes the most sense to cancel disability and channel that money into more necessary policies. Furthermore, most disability policies require you to work, so you may not be able to continue it even if you wanted to. Be sure to check on policy requirements to make sure you aren’t paying into a plan that is not protecting you.