Retiring? Here's the Insurance You Still Need
By Liz Pulliam Weston
Fact is, you can probably jettison some policies. But there are others you shouldn't
go without. Here's a handy guide.
The average American's wealth peaks in the early years of retirement, which means
you may have more to lose than ever before. Here's the insurance you should think
Medicare coverage doesn't kick in until you're 65, so if you're planning an early
retirement, you'll need to factor in the costs of paying for your own coverage for
Buying a policy on your own can be expensive, especially because individual health
insurance policies get more costly as we age. Going without insurance, however,
is too big a risk to take -- one illness or accident can wipe you out financially.
If you can't qualify for a group policy (say, through a professional association
or other large organization) and you find the individual premiums for standard insurance
too high, consider buying a high deductible or "catastrophic" policy. The monthly
premiums will be lower than for standard coverage, although in the event of a pricey
health problem, you'll have to pay quite a bit out of your own pocket ($1,000 to
$5,000) to meet the deductible before the coverage kicks in.
With more assets than ever, you could be at an even bigger risk of being sued. Make
sure you keep the maximum available liability coverage on your homeowners and auto
If your total liability coverage doesn't at least equal your net worth, consider
adding an umbrella or personal liability policy or increasing the limits on the
umbrella policy you already have.
This type of policy covers expenses that health insurance and Medicare typically
do not: the costs of a nursing home or home care if you're too disabled or ill to
take care of the basic functions of daily living, like feeding, bathing or dressing,
by yourself. The costs of such care typically start at $60,000 a year.
Because this insurance is new, however, there is much controversy over who needs
to buy it and when.
If you have plenty of assets -- $1 million or more -- and aren't worried about leaving
an inheritance, you may decide to skip the insurance and use your wealth to pay
for any care you need. If you have few assets, you're likely to qualify for Medicaid,
the government health plan for the indigent, which covers nursing home costs.
If you're somewhere in between, or you're determined to protect your assets for
your kids, then long-term-care insurance might be a wise option. Many financial
planners say the best time to buy the insurance is in your mid-50s to early 60s.
For more information, visit the Web site run by H.E.L.P.,
a not-for-profit organization that educates seniors about financial matters.
Even if your home is paid off, you most likely will still need the protection homeowners
insurance can provide. Not only will it rebuild your house if necessary, but homeowners
insurance also provides liability protection in case you get sued.
You can save money by substantially raising your deductible. You should have enough
savings set aside to pay for the first $1,000, $2,500 or even $5,000 of home damage
out of your own pocket. Raising your deductible to those amounts will save considerably
on your premiums.
If your children are grown and financially independent, and you have enough in assets
to support your spouse should you die, then you may no longer need life insurance.
On the other hand, if you're going to leave a considerable estate, life insurance
could be used to pay any estate taxes that would be due.
In 2007, estates of more than $2 million ($4 million for couples) are subject to
estate taxes; in 2009, it's estates of more than $3.5 million ($7 million for couples).
The portion of an estate beyond the exemption is taxed at 45%. Although the estate
tax is scheduled to be repealed in 2010, the repeal is currently slated to last
just that year, with estate taxes returning for estates worth more than $1 million
Your best bet is to consult a qualified financial planner, probably in conjunction
with an estate-planning attorney, to evaluate your individual insurance needs and
the policies you own.
Reproduced with permission of MSN Money.com, from Retiring? Here's the insurance
you'll need, Liz Pulliam Weston, 2007; permission conveyed through Copyright Clearance