Finding the right insurance policies for your lifestyle and financial goals can be a challenge
If you’ve just retired, insurance might be the last thing you want to think about. Your focus is more likely on martinis, golf, and long days at the beach (if you’ve planned your retirement correctly, that is).
While it may be easier to forget your financial responsibilities for a few years after you’ve retired, doing so could lead to serious headaches down the line– especially if disaster strikes.
So, instead of ignoring insurance, do a little bit of research and plan to make a monthly investment in a few, smart policies that can set you up on a worry-free vacation for the next few decades. (That’s what retirement is supposed to be, right?!)
Life insurance is essential– and in some (very limited) cases, may even help pay for retirement
If your kids (or grandkids) aren’t self-sufficient, or your house isn’t fully paid off, it’s a no-brainer that you should carry life insurance well into retirement– or at least until your family’s financial situation changes for the better. However, life insurance may still be able to help you, even if you don’t have such obvious needs.
For example, if a retired couple depends on the income that one spouse gets from pension payments or income sources that won’t carry over to the other spouse upon his or her death, a solid life insurance policy can help make up for the lost income. However, it’s important to realize that the expenses of one person can often be significantly less than that of two, so the other spouse’s life insurance policy doesn’t need to cover the financial needs of both spouses, just the remaining one.
If you already have a life insurance policy and you’re thinking of canceling it, take these factors into consideration first. Instead of a cancellation, you may simply want to shrink your policy to meet your current needs while locking in your current rate; if you cancel a long-held policy and then buy a new one, you’ll likely have to spend considerably more money, to receive less coverage.
Term life insurance vs. permanent life insurance policies
There are two major types of life insurance policies that retirees can purchase; term life insurance and permanent life insurance. Term life insurance provides coverage for a specific, pre-determined amount of time, often between 15 and 30 years, while permanent life insurance coverage lasts as long as you live. (As long as you keep paying for it.)
If the holder of a term life insurance policy lives until after the term expires, the policy becomes worthless and doesn’t provide a payout to the holder’s heirs. In comparison, a permanent life insurance holder’s policy accumulates cash value over time– meaning that it will provide a guaranteed payout to the holder’s heirs, but will also cost the holder a lot more. One of the other benefits of having a permanent policy is that holders are allowed to withdraw, or borrow against the policy’s cash value, which, in certain situations, you may be able to use to help fund your retirement. This has a couple of upsides, including the fact that withdraws from a policy are 100% tax free– but the initial expenses of a permanent life insurance policy make it far too pricy for many retirees.
For those who retire early, finding affordable and comprehensive health insurance can also be a challenge
If you retire before the age of 65, you could be left in a ‘dead zone’ when it comes to your health insurance. You’ll no longer be on your employer’s plan, but you won’t be eligible for Medicare yet, either. So how do you get decent health insurance without breaking the bank? The key, in part, is to start looking for an affordable policy well before you plan to retire.
For one, if you work for a large employer, you should see if they’ve signed up for the Early Retiree Reinsurance Program, a federal program that allows companies to get government reimbursements if they continue to insure employees that have recently retired. If your employer hasn’t signed up, you may want to look into COBRA continuation coverage, which can be a good temporary option for many early retirees who want to keep their employer’s insurance. However, COBRA’s availability and scope are limited. Most plans only cover a former employee for 18 months, so you’ll have to be at least 63 and a half to experience a seamless transition from your old company’s insurance to Medicare. It can also be prohibitively expensive, which may make it undesirable for many early retirees and their families.
In addition, if you have a pre-existing condition that’s preventing you from getting private insurance, you may want to look at state-funded high risk pools and pre-existing condition plans, which are specifically designed for individuals who are often refused other kinds of insurance. In addition, some large corporations, like Starbucks, offer health insurance to part time employees. So, if you’re willing to work part time for at least a portion of your early retirement, it may be able to take some of the financial burden off your insurance bills while putting a little more cash in your pockets.
Prepare and do research to find the policies that fit you and your family best
Getting the right insurance to protect you during retirement can be a big challenge. To get the policies that fit you and your family best, you’ll need to consider a variety of factors, including your age, family situation, dependents, medical history, income, assets, and debts, just to name a few. So, when trying to decide between policies, ask a lot of questions. When it comes to insurance, it’s better to know too much than too little.
While making insurance choices can be tough, you don’t have to do it all alone. At Avante Insurance, our experts know insurance– and we use our expertise to get you the best deals and help you make the smartest decisions when it comes to protecting you and your family.
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