Retirement is when everything changes. Seniors may end up with new schedules, new hobbies and even new homes. In the midst of all these exciting changes, don’t overlook the mundane: your insurance coverage. With a new season of life at hand, old policies may no longer meet your needs.
Benjamin Sullivan, a certified financial planner with Palisades Hudson Financial Group in Austin, Texas, says seniors should be cautious about canceling their policies. You need to consider your future insurability as well as your individual circumstances. “There isn’t a one-size-fits-all answer,” he says. “The standard wisdom might be the exact opposite of what’s best for the specific individual.”
[Read: Medicare Out-of-Pocket Costs You Should Expect to Pay.]
Here’s how to decide which policies you need and what you can skip after age 65.
Two Must-Have Policies for Seniors
The following two types of insurance are universally necessary for seniors.
Medical insurance. The increasing cost of health care that comes with advanced age is a major reason to buy medical insurance. And since the implantation of the Affordable Care Act in 2014, the law requires virtually everyone to maintain coverage.
Most seniors age 65 and older are eligible for Medicare. Seniors who are still working may have benefits through their job, and it can make sense to use your workplace plan instead. “[Medicare] is not always the best option,” Sullivan says. “It might be more advantageous to stay on the private health insurance.”
Medicare imposes a late enrollment penalty on those who don’t sign up for Medicare Part B and Part D when initially eligible, but that penalty may not apply if someone has group coverage through the workplace. Seniors should confirm whether the penalty will be waived before declining to enroll at age 65.
[See: 10 Medical Services Medicare Doesn’t Cover.]
Homeowners or renters insurance. Homeowners and renters insurance insures against the loss of property and possessions and also provides liability coverage. Seniors who have valuable jewelry, art or other items may need to add a rider to their policy to fully insure these things.
Four Options That May Be Smart
Beyond health insurance and homeowner coverage, there are a number of other insurance products that could be helpful to seniors. You may want to insure other assets or use insurance products to help meet financial goals. Many seniors will find one or more of the following insurance policies are right for them.
Car insurance. Like health insurance, car insurance is legally mandated in almost every state. Any senior who is still driving and owns a vehicle should insure it properly.
Umbrella insurance. An umbrella policy provides additional liability coverage above and beyond what’s included in homeowner and car insurance. You don’t need to be affluent to find these policies beneficial. They’re for “anyone who feels that roughly $250 a year will help [them] sleep better,” says Gary B. Garland, a financial planner and owner of Integrated Wealth Solutions in Manalapan, New Jersey. “I would recommend that to virtually anyone.”
Annuities. Seniors are living longer, and so a person’s savings might not be enough to cover an extended retirement. “The need to insure against longevity is becoming more and more common,” says Matt Fellowes, founder and CEO of United Income. An immediate annuity can help guard against outliving savings by providing a guaranteed source of income.
Life insurance. Although the main purpose of life insurance is to replace lost income, retirees may want to keep their coverage. “It boils down to this: if you owe someone, love someone or someone depends on you financially, you need life insurance,” says Marvin Feldman, president and CEO of the industry nonprofit Life Happens. “Just because you’re retired or old doesn’t mean those three things go away.”
Life insurance can be used to pay off debt, leave an inheritance or provide for a spouse in the event a pension doesn’t include survivors benefits. What’s more, policies may offer living benefits that can be used in the event of a terminal illness or the need for long-term care.
[Read: How to Keep Your Social Security Number Safe.]
Two Types of Insurance to Live Without
Just as there are two types of coverage virtually every senior needs, there are also two insurance policies almost every senior can do without.
Disability insurance. Once seniors are eligible for Social Security, the need for disability insurance disappears. If someone becomes unable to work, they can begin their retirement benefits instead of relying on disability coverage. Even though it’s not necessary, seniors in the workforce may still be buying these plans as part of their benefits package. “Many workers unknowingly pay for disability,” Fellowes says.
Long-term care insurance. Although long-term care insurance might seem vital, Fellowes sums up the concerns of many about this product. “We don’t believe it is a good investment for many people because the market is so unstable,” he says. Many carriers have left the market, and the future of these products seems unclear.
Even if someone purchases a relatively low-cost policy at a younger age, there is no guarantee the premiums will remain affordable by retirement. “What happens is that seniors can’t afford it after they’ve sunk money into premiums,” Sullivan says. Instead of long-term care insurance, older workers and seniors may be better off investing their money to self-insure or looking for hybrid life insurance or annuity products that can cover these expenses.
Insurance may not be one-size-fits-all, but these guidelines can help seniors determine which policies are essential for them and which could be a waste of money.
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The Only Insurance Policies You Need After Retirement originally appeared on usnews.com
