As you approach retirement age, you’ve likely spent a lot of time thinking about your investment portfolio and how to ensure you have enough saved up to maintain your lifestyle in your golden years. However, have you considered what types of insurance coverage you’ll need once you retire?
When you reach retirement, your insurance needs may change. Some types of insurance become more important, while others may become less relevant. With so many options, it’s easy to get overwhelmed. So, let’s look at the types of insurance after retirement you should consider and when is the best time to purchase them.
What Insurance Should You Get When You Retire?
These are the essential policies you’ll want to consider in retirement:
Health Insurance
Health insurance is arguably the most critical type of insurance you’ll need in retirement. As we age, the likelihood of experiencing health issues increases, and medical expenses can quickly add up. For most retirees, Medicare will be the primary solution.
Medicare has four main components:
- Part A covers hospital stays, skilled nursing facilities, hospice care, and some home health services. Most people don’t pay a premium for Part A.
- Part B covers doctor visits, outpatient care, preventive services, and some home health services. There is a monthly premium for Part B based on your income level.
- Part C is the Medicare Advantage program, which allows you to enroll in private health plans approved by Medicare. These plans often include drug coverage. Part C “bundles” original Medicare (parts A and B) into one plan but comes with provider restrictions. You don’t have the freedom to choose doctors or hospitals.
- Part D covers prescription drug costs through private plans approved by Medicare.
In addition to basic Medicare (Parts A and B), many retirees purchase supplemental policies often referred to as Medigap. Medigap fills in the “gap” from your original Medicare plan. These policies help cover some of the costs that Medicare doesn’t, like copayments, coinsurance, and deductibles. Supplemental plans are sold by private companies and can be very helpful in reducing out-of-pocket expenses. Approximately 81% of retirees purchase supplemental insurance to help with costs that Medicare doesn’t cover.
The right time to purchase Medicare and any supplemental policies is near your 65th birthday. You can start purchasing three months before your birthday and continue up to three months after. Missing this window could result in higher premiums or even an inability to get coverage.
Long-Term Care Insurance (LTC)
LTC is another essential consideration for retirement. This type of insurance helps cover the costs of assisted living facilities, nursing homes, or in-home care services if you become unable to perform certain activities of daily living (ADLs) due to age, illness, or disability.
The cost of long-term care can be staggering, and it’s not covered by Medicare or most health insurance plans. According to Genworth, the average cost of a semi-private room in a nursing home in 2024 is $107,900 per year. The U.S. Department of Health and Human Services estimates that approximately 70% of people turning 65 will need some form of long-term care services in their lifetime.
The best time to purchase long-term care insurance is typically in your mid-50s or early 60s when you’re still relatively healthy and can qualify for lower premiums. Waiting too long can result in higher premiums or even disqualification due to pre-existing conditions.
Life Insurance
You may think life insurance is unnecessary once you retire, especially if you’re single with no dependents. However, life insurance can serve important purposes for retirees beyond just income replacement.
A life insurance policy’s death benefit can be used to cover things such as:
- Funding a trust for grandchildren’s education or inheritance
- Paying off any remaining debts like a mortgage
- Covering final expenses and medical bills
- Leaving money to charity or other causes
The type of life insurance that makes sense depends on your goals. Term life insurance is cheaper but only provides temporary coverage. Permanent policies like whole life build cash value you can access but have more expensive premiums.
As a general rule, it’s wise only to buy just enough life insurance to cover your specific needs in retirement rather than an excessive amount.
Generally, the younger and healthier you are, the cheaper your life insurance will be. If you don’t already have life insurance, purchasing a policy in your 50s or early 60s is recommended when premiums are still relatively affordable. However, if you have existing coverage, you should review and adjust your policy as needed to align with your retirement goals and financial situation.
Auto, Home/Renters Insurance
Remember to account for basic property and liability coverages, too! Even in retirement, you’ll likely need auto insurance to drive, as well as home or renters insurance to protect your place of residence and personal belongings.
The insurance needs here are largely the same as when you were younger. However, some providers offer retirement discounts that could help lower premiums. Additionally, downsizing to a smaller home, reduced annual mileage, or other lifestyle changes could impact your coverage needs.
It’s a good idea to reevaluate your auto and home insurance needs as you transition into retirement. Shopping around for new quotes and raising deductibles could yield some excellent savings.
Umbrella Policy
Umbrella insurance provides additional liability coverage beyond what’s included in your homeowners or auto insurance policies. It can protect your assets in case of a significant lawsuit.
Consider purchasing umbrella insurance if your net worth is higher than the liability limits on your existing policies. This can be particularly important in retirement when you may have substantial assets to protect.
Tips for Getting the Best Deals for Your Insurance in Retirement
Here are some tips to help you snag the best deals and keep your premiums in check:
- Shop Around: Compare rates and coverage options from multiple insurance companies. Don’t be loyal to just one provider—loyalty rarely pays off in the insurance world.
- Raise Your Deductibles: This is a double-edged sword. A higher deductible lowers your monthly premium, but you’ll have to pay more out of pocket if you need to file a claim. Choose a deductible you can comfortably afford in case of an emergency.
- Review Your Policies Regularly: Your health, driving habits, and financial situation can all change over time. Schedule annual check-ins with your agent or revisit your policies online to ensure your coverage still aligns with your needs.
The key to buying any insurance for retirement is to plan ahead. Don’t wait until you’re retired to consider your coverage needs. At that point, you may face higher rates or even be denied certain policies due to age and health reasons. Instead, review your insurance needs a few years in advance so you can get the right coverage in place before fully retiring.
See How Legacy Can Help You
At Legacy Planning, we understand the importance of having the right insurance in retirement to secure your golden years. To see if we can help you navigate which insurance options best suit your situation, click here to schedule a conversation today.
With the right insurance policies in your overall plan, you can enjoy a more secure, worry-free retirement without draining your nest egg. Putting these protections in place will let you kick back and relax, savoring all the fruits of your labor!
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.