As we get older and enter retirement, some decisions need to be made regarding insurance coverage. We know from our own experiences with elderly parents – and from what we read – that long term care insurance makes sense. However, the premiums can be extremely high as we discuss in this related post.
We also know that our need for life insurance may decrease as we age, while the premiums for coverage increase exponentially. Here are some of the key concepts to consider as you make insurance decisions around your retirement:
- You might need life insurance in retirement. In many cases, maintaining a life insurance policy in retirement still makes sense. If you have solid wealth, you may not need the coverage for final expenses, but instead you may need it for estate taxes. The other issue to consider is the loss of Social Security and pension income when one spouse dies. Social Security will decrease when one spouse dies, and most pension benefits reduce to a percentage of the original amount for a spouse after the covered worker passes away. Life insurance can make up for these benefit reductions and protect the surviving spouse.
- Term life loses its appeal. Term life insurance is cheap when you’re young, but as you age, the cost of term insurance becomes prohibitively expensive. If you have permanent coverage, consider adjusting it to your needs in retirement. If all you have is term insurance, you may end up cancelling it due to the high premiums.
- Long term care insurance is expensive. The cost of long term care insurance continues to rise, and if you think you are locking in your rate when you buy, think again. Long term care insurance premiums can and probably will increase, even after you purchase your policy. In order to be efficient with your premium, you must know how to maneuver among the trove of benefit and rider options available. You’ll want to enlist the help of your financial planner or insurance specialist to make sure you have the features that are most important to you, and leave off less important ones to save on costs.
Bottom line: Don’t assume you always need long term care insurance in retirement and don’t assume you never need life insurance. Every situation is different. I have clients who are able to maintain a wonderful retirement plan scenario without long term care insurance. I have other clients whose life insurance is an integral part of their retirement.
Our process is designed, over a series of meetings, to provide clarity to complex decisions like long term care and life insurance. If you’re asking these types of questions about your retirement, I encourage you to schedule an appointment with me to discuss your unique situation and find the best solutions for your retirement plan.