For most people, once insurance is in place, they just keep paying the premium without much thought. However, reviewing and reconsidering all your insurance policies every few years is a financially smart practice. Not only can it save you money, but it can also help you understand your policies better.
Why Should You Reconsider Your Insurance Now?
As you head into retirement, the more money you save, the more you’ll have for fun years. This is why reviewing your insurance policies is particularly important after you turn 60. Changing circumstances make it worth considering what kinds of insurance you no longer need and maybe some new types you should consider.
Don’t be overwhelmed by the idea of reviewing your insurance policies. Think of it in terms of saving money.
Understand Your Risks and Insurance Needs
Your insurance needs change as you age. The risks you want to cover with insurance are different when you’re 60 than they were when you were 35. For example, perhaps your children are grown, or your mortgage is paid off, so life insurance is less important than it was 25 years ago.
However, as you age and retire, you might want to consider long-term care (LTC) insurance to address future risks. Even if you’ve had insurance policies for decades, they may not be appropriate for your current needs.
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. Most life insurance premiums are age-related, so the older you are, the more it costs. Many people are wasting money on life insurance thinking about leaving their children money and forgetting they have other assets for their heirs.
The Baby-Boomer Effect
Call it the baby-boomer effect: America is getting older faster than ever. With this change in demographics, it’s essential to understand your insurance needs thoroughly. Reconsidering and adjusting your insurance policies as you age will ensure you’re sufficiently covered and save you money in the long run.
Life Insurance and Disability Insurance: Understanding Your Needs
Life insurance is an essential tool to ensure your dependents can maintain their lifestyle and cover outstanding debts in the event of your unexpected death. However, you may not need life insurance if you have already built substantial assets to provide for your family’s needs.
Exceptions exist, though; if you have young dependents or those who are unable to care for themselves, maintaining life insurance policies may be vital to sustaining their lifetime needs. Likewise, if you intend to keep assets such as property or a business intact after death, life insurance can be used to cover estate taxes.
It’s essential to approach objective information from your financial planner, lawyer, or accountant to select a proper beneficiary for the policy to serve your purpose. For example, if you designate a special needs trust as the beneficiary, it can aid a disabled child after your passing.
Disability insurance is generally an employee benefit, but self-employed individuals or professionals like doctors and lawyers might have their policies. Before choosing a disability insurance provider, consider the details carefully. Most policies only cover disability payments until you reach retirement age – around 62 or 65 years old.
It’s essential to consider what would happen if you became disabled. Could you access retirement plans – which can result in penalties and taxes – or maintain household debts? How long could you sustain yourself on your savings until you must rely on social security retirement funds?
Managing Professional Disability Premiums
As a professional, you may already have disability premiums to cover you during tough times. However, the high costs may be a concern. It’s important to analyze the coverage and time frame, and see if you would be able to manage without the policy. If the premiums are too high at 61, it may not be worth it for the 18 months of coverage you receive. But if you do opt for disability insurance, don’t forget to review the policy annually as your retirement approaches.
Long-Term-Care Insurance (LTC)
While long-term-care insurance is often touted as necessary for the aging population, it may not be the best choice for everyone. Annual premiums can be too expensive for those who truly need it but don’t have the assets for continuous payments. However, some companies do offer LTC policies as part of benefit packages, and may allow you to retain the policy upon retiring if you agree to pay for it.
It’s important to make smart choices when purchasing LTC insurance. The earlier you purchase a policy, the cheaper it tends to be. But as you age and even with a policy in place, premiums increase and cut into retirement income. Before you decide if LTC insurance is necessary for your situation, take time to understand your financial and personal needs. Review your assets, assess your goals and make an informed decision.
Insurance Needs for Older Americans
When it comes to insurance, older Americans are often bombarded with options. However, the three types of insurance policies they are most likely to need are home, automobile, and health insurance.
Homeowner (or Renter) Insurance
Regardless of where you live, you will need home insurance. This holds true even if you have downsized to a condominium and the homeowners association pays for condo insurance. Having your own insurance provides coverage for personal items and appliances within your condo, along with liability protection.
If you plan on renting during retirement, take into consideration how much it would cost to replace all your personal items and furnishings. Renters’ insurance can help pay for these costs and also provide alternative living arrangements in the event of an unforeseen event such as a hurricane.
Long-Term Care Insurance
While long-term care insurance is not just about the costs, it also includes the benefits. It’s important to conduct extensive research before purchasing a policy based on the assumption that you will need assisted living later in life. According to the Centers for Disease Control, only 7% of older Americans need help at home.
Some pre-retirement individuals set up an account solely for long-term care needs in the future. By building up savings without purchasing insurance, they feel ready to face whatever comes their way.
It’s important not to make an emotional decision when it comes to purchasing any type of insurance. Don’t allow yourself to be pressured by an insurance agent into buying more than you need or can afford.
When it comes to any type of insurance policy, don’t shop based solely on the cheapest rates. It’s important to compare policies from different companies and determine which one provides the most comprehensive coverage at a price that you can afford.
Finally, don’t forget to adjust your deductible to make coverage more financially feasible. With these tips in mind, older Americans will be able to make informed decisions when it comes to their insurance needs.
# Taking Control of Your Insurance Needs at Age 60
At age 60, you might find that your insurance needs have changed over the years. It’s important to review your coverage to ensure that you are getting the most out of your policies.
If you own a car, then you should consider purchasing car insurance. Review your coverage with an agent and look for ways to save money. For example, if you don’t drive as much as you used to, then you may be able to reduce your premiums.
Consider raising your deductible from $250 to $500 or even $1,000 to lower your premium. However, only do this if you have enough money to cover the deductible if you need to make a claim. By taking on more of the costs of damage, you’re less likely to make smaller claims that cost your insurance company money.
Private Health Insurance
If you’re not eligible for Medicare yet, then you need to have private health insurance. If you’re over 65, then there are gaps in coverage, and you might end up being responsible for out-of-pocket expenses.
Consider where you live, the prescription medications you’re taking, and what you can afford to pay if you fall ill.
Take control of your insurance needs by reviewing your policies and looking for ways to save money. If you need help, speak with a financial advisor in your area.
More from Next Avenue:
- Demystifying Car Insurance
- The ABCs of long-term-care insurance
- A Problem With Life Insurance That’s Universal