Women and Insurance Needs in Retirement

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Women and Insurance Needs in Retirement

When you budget your expenses during retirement, you’ll need to factor in insurance.

First, we’ll take a look at life insurance. Beyond insurance for your burial, ask yourself if you NEED life insurance, at all. Most retirees don’t need life insurance. You DO need life insurance if:

• You have non-adult children
• Your spouse will incur a significant financial loss when you die
• You are a business owner or partner

The next question is, do you WANT life insurance? Depending upon your health, term life insurance is not very expensive. You may choose to pay a little each month so that family and/or a favorite charity will benefit upon your death.

The Medicare option

Most retirees will no longer have company health benefits, and you will go on Medicare. The first thing you must know is that Medicare is not free. For budgeting purposes, bear in mind that you can have the premium deducted from your Social Security payment. Medicare will send you a book with your benefit options when you first enroll. After that, you’ll have the option to make changes annually.

Unlike most private insurance plans that have co-payments, Medicare has co-insurance, which is much more difficult to budget. For example, the most Medicare will pay for a doctor visit is 80% of the allowable amount. If the doctor charges $100, and Medicare allows $80 for that visit, they will only pay the doctor $64, or 80% of $80. That results in a co-insurance payment from you of $36 ($100 – $64). In a private insurance plan, the co-payment may only be $20, or less. You can see from just one example that co-insurance can be much more expensive than co-payments. This is particularly true if your health status warrants seeing multiple doctors regularly, or if you need tests done that will leave you with substantial co-insurance payments.

More information on Medicare costs can be found here.

Private health plans

As a result, many retirees choose to purchase secondary insurance, which will, generally, pay for the entire co-insurance bill. There are many types of secondary insurance, often called "Medi-gap," so do your homework.

What about long-term care?

Finally, you may want to look into long-term care insurance (LTC). LTC insurance provides benefits for nursing home and/or at-home care when you become unable to live independently. Whether you will need long-term care and whether you can afford the care without purchasing insurance are guessing games. Major considerations when looking at LTC policies are:

• If you have a health issue that could become increasingly disabling, you may want to consider purchasing when you are younger.
• Before weighing the pros and cons of different policies, the soundness of the companies selling them should be determined.
• Experts agree that if you choose a policy that allows protection from inflation, take it. Otherwise, your promised benefit will remain fixed, while the cost of LTC care steadily increases as the years go by until you finally make a claim.
• All LTC policies require extremely careful attention to detail, especially when comparing one to another. Make sure you understand the benefits offered, and that you’re comparing apples to apples.
• Make sure you understand the language of the policy as to what is covered and when it’s effective.

Long-term care is expensive; accordingly, so are LTC premiums, which can go into the thousands per year. The best strategy to keep LTC insurance affordable is to buy it while you’re relatively young. But whatever the cost, if you really can’t afford it over the long haul, don’t buy it. The last thing you want to do is purchase a policy and then drop it, wasting thousands of dollars.