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Why You Need to Include Insurance for Your Retirement

Why You Need to Include Insurance for Your Retirement

21 Sep 2021
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If you’re like most people, chances are that by the time it comes to retire from your job, your employer’s health insurance had been taking care of most of your basic health and life insurance needs through a company-offered plan. But once you retire, there is a good chance that this coverage will go away. While Medicare provides some coverage after age 65, it may not cover 100% of what doctors charge when you are retired and no longer working.

It’s easy to imagine retirement as a time when you’ll have enough money to do what you want, when you want. But retirement planning isn’t just about money – it’s also about protecting yourself from certain risks. When you’re getting close to retirement age, there are risks that can be mitigated with the help of insurance and proper risk management.

If you plan to work during your retirement years, your income-producing capability may be limited by how many hours you can work and other factors such as your physical stamina. It may be tough or near impossible to replace a source of income through other means if something were to happen to your ability to earn an income during retirement. However, with risk management planning, insuring against a serious illness or death can help someone overcome the fear of not being able to retire when the time comes.

What Types of Insurance Are Part of a Risk Management Plan?

Retirement planning often includes insurance for retirement risks in the following areas:

Death or Disability Insurance. Death or disability can be the largest risks you face during retirement, so it’s worth careful consideration when it comes to insuring against these risks. When people are young, they generally tend not to think about disability so much because if an injury does occur, there is more time to recover.

Death is always a possibility, but disability becomes more of an issue because if you end up suddenly unable to work due to an illness or injury, how would you support yourself? How much money would you need to until you are able to return to the workplace? If you don’t have enough saved up, could your retirement be at risk? You’re never too young to think about protecting yourself with this type of insurance.

Life Insurance. Life insurance protects your family financially in the event of your death. The key benefit of life insurance for retirement planning is that it covers the debts and expenses related to funeral expenses. Life insurance proceeds can also cover outstanding financial obligations such as credit cards, automobile loans, mortgages, and the like. Life insurance can also help provide some retirement income for your surviving loved ones. There are many types of life insurance, and talking with a retirement planning professional can help you find out which type of policy would best suit your needs.

Health Insurance. Health care costs continue to rise, and by the time you retire, the costs could even be higher than they are today. One of the issues of not having enough health insurance during the age of retirement is you could end up spending much more than you could afford on healthcare if a major illness were to occur. Keep in mind that the longer we live, the higher the risks for certain diseases and aliments such as arthritis and cancer, so it’s important to take into consideration having some type of health coverage that extends beyond retirement age instead of only covering the years prior to retirement.

Why Plan for Retirement Risk Management Now?

Including insurance as part of your retirement now is important because as you age, you can expect to pay higher premiums because medical conditions generally worsen over time. This means that if someone in their 20s were to experience a serious injury or illness they would probably need less financial assistance than somebody who’srisk at time of retirement much older, and that could result in higher premiums for them later on.

Long Term Care Insurance. Long-term care insurance helps protect your assets by covering costs associated with long term health services that are necessary to maintain a person’s daily living activities, such as bathing, dressing, eating or attending to other bodily functions that are similar to those required during normal daily living activities. Medicare may not cover long-term nursing home stays or community based long-term services and may not fully reimburse you for all your expenses.

Long term care insurance can be an important part of retirement planning because of the possibility that you might need expensive long-term care. Long-term care insurance, also called custodial care, generally provides help with routine daily activities mentioned above so you don’t have to move into an assisted living facility.

Depending on the type of policy, long-term care insurance may not cover the cost of custodial care, which means assistance with activities such as cooking, cleaning and doing laundry. You will have to pay for this kind of assistance out of your own pocket if you need it. Long term care may not cover home modifications for people who need them after a serious accident or debilitating condition occurs because these kinds of services would generally fall under the category “custodial” services.

How long does long-term care insurance last? Long-term care policies vary in length of time, type of benefits provided and cost. The average long- term care policy can be slightly more expensive than a long-term disability plan but it provides broader coverage. You can choose the amount of daily benefit you want to receive for long term care services, if needed. It’s important that you compare long term care insurance quotes from different providers before you purchase a policy because premiums can vary significantly among carriers.

Insurance can help you plan for the future, so it’s never too early to start thinking about these important financial products. Whether your goal is to protect your assets or provide a retirement income stream, there are many types of insurance that may be helpful in achieving this objective. Get started by considering how much life insurance coverage you need and what type will best suit your needs before meeting with an Independent Wealth Advisor who can evaluate your specific situation. You might also want to look into long-term care insurance as well because Medicare may not cover all services related to custodial care which means assistance with activities such as cooking, cleaning and doing laundry. Long term care policies vary in length of time, type of benefits provided and cost; make sure you compare long term care insurance quotes from different providers before you purchase a policy because premiums can vary significantly among carriers.

 

More about the author: Harry Sherdil
As a fiduciary financial advisor at an independent firm, Harry strives to offer the same resources, tools, and research as bigger firms while serving new and existing clients' best interests.
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