Retirement Insurance: How to Cut Costs and Insure What Matters

couple enjoying life in retirement
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Retirement is a time to cut costs and reassess your needs, and insurance is one area where your needs will change depending on your situation when you retire. Here's how to decide if you really need all that your insurance offers, what to change, and what to keep.

What Insurance Do You Need in Retirement and What Can You Reduce?

There is no single answer to what you can reduce or cut corners on during retirement to save money, because it depends largely on your personal situation. You may fall into one of these categories:

  1. You have just enough to retire or are just making ends meet, in which case you definitely want to try and cut costs to save money. You don't want to be paying extra since you know money will be tight.
  2. You have saved enough money for your retirement, and you have built up assets to a point where you are comfortable. You're doing "okay".
  3. You have more than enough assets, you have provided for yourself and your family's needs for the retirement years ahead and are not worried about money, but you don't need to throw money away for no reason.

    Your age at retirement will also come into play as you review your need for various insurance products. The help of a financial advisor and insurance professional will help. You can use the tips below to help you come up with ideas and areas of discussion to look into.

    Tips to Save Money on Insurance In Retirement

    In each of these scenarios, there are ways to save money, but the approach will be different. Here are some tips to help you decide if you can make adjustments to your insurance to save money or protect yourself better.

    Life Insurance in Retirement

    Throughout most of our lives we understand the need for life insurance to provide for our family in the event of our death, but as we get into retirement, the need and the strategy around what the life insurance can be used for may be different. Ask yourself these questions:

    1. Do you still need life insurance to support your family in the event of your death, or are your assets enough to provide for the people you care about? If you've been paying into life insurance for many years, be very cautious before terminating a policy because getting one in the retirement years is very expensive. There may be alternative options to accomplish your goals.
    2. Even if you do not need life insurance to support your family in the event of your death, you should consider your life insurance as a tool for estate planning, or to provide a legacy to your family. Is this a time to switch the type of life insurance policy you have?
    1. Is the current insurance policy you have the best kind of life insurance for your new situation? Do you have a policy with values? Would you borrow money from your life insurance policy?
    2. Do you need to replace a life insurance policy previously provided by your employer? Converting your employer-sponsored life policy into an individual policy may help you save money because it may respect the age you originally signed up for it, and avoid having to take a new life insurance medical exam where you will be rated on your current age.

      These are all important questions that a financial advisor can help you with, among many others based on your situation. Learn more in this article: "10 Different Situations and Ways You Can Use Life Insurance".

      Liability Insurance

      Now that you are into your retirement, your goals are likely more about protecting what you have. Liability insurance becomes very important because liability is the coverage that protects you from personal financial losses. More than ever, this is the time to protect your assets because you have something to lose. The good news is that basic liability comes with most residential policies, like home insurance, condo insurance, and renters insurance. You also have the option of getting excess liability to enhance your protection.

      This can often be obtained for a couple of hundred dollars a year. Learn more about Umbrella Liability and how it can protect you here.

      Home Insurance in Retirement and Savings

      If you've paid off your home or have some savings, you may be able to save more money on your home insurance by increasing your deductible. In the earlier years of life it is sometimes hard to afford a high deductible, but if you have enough to self-insure yourself for the first couple of thousand dollars of a claim, or avoid making smaller claims, then this is an area where you may benefit.

      You may also qualify for special discounts if you become a member of certain retiree associations in your area, or if you let your home insurance (or condo or renter insurance company) know you are now retired. Many companies give better rates to retirees, so this is a good time to shop around and find out if you are really getting the best price on your insurance.

      If you are not a homeowner, it may be tempting to cancel your renters insurance, but don't forget the liability portion of coverage that comes with your renter policy.

      Saving On Car Insurance In Retirement

      Your car insurance may offer you similar advantages to your home insurance when you let them know you are retired. You will likely qualify for:

      • Discounts for a lack of commute
      • Lower mileage credits
      • Retiree discounts

      Some companies are known to have better rates for retirees, so shop around. According to the Insurance Information Institute, you could also save up to 40% on your car insurance rates by increasing your deductible anywhere from $200 to $1000.

      TIP: If you have car insurance and plan on renting a car when you travel, consider contacting your car insurance company and asking them if they will cover the insurance on your rental car. This could save you $20 a day or more.

      Tips to Save Money on Travel Insurance In Retirement

      If you are like many retirees, you may be planning to spend some time traveling in your retirement. Depending on how often you will travel, and the length of your stay outside of your state you may have many options to choose from.

      Consider purchasing annual travel plans instead of single trip plans. An annual travel plan is a cost efficient way of managing travel insurance and takes away your worry of applying for travel insurance at last minute.

      Protecting your health and making sure that you have medical coverage while you travel is very important. Learn more about health insurance in retirement here, and more about Medicare and Medicaid here.

      Review the options of a travel insurance plan and make sure you need everything that is included. Health insurance coverage while you are out of state or country should be your primary focus.

      Find out about what the limits and exclusions are in the policy and if they include coverages for travel back home or air ambulance coverage if you are going to a remote area.

      • You may have coverage on your health insurance plan for some types of travel, but it is extremely important to call your health insurance company before you travel to find out if they offer extended health coverage or supplemental insurance plans to cover you before you buy a separate plan elsewhere.
      • Check your credit card company to find out if you have the kind of credit card program that offers travel insurance, if it does ask them for the specifics and compare this with what is being offered to you through your heath insurance, or a travel insurance specialist. It is tempting to just take the "free" coverage, but sometimes the limits of coverage can be very low, and not enough to cover a real medical emergency. Protect yourself by asking in depth questions about payment limits, scope of medical coverage and claims handling.
      • Be sure and check on other options like group membership plans as well. AAA is one example of a membership plan that may be able to provide some travel options as well as other discounts during your trip.
      Always Research and Compare your options.

      Once you have selected travel insurance that protects your health costs, you will likely be offered plans with coverage for lost luggage, personal belongings as well.

      If you have home or renter insurance, contact your home insurance company first to find out how much coverage you have on your policy. You may decide that you do not want to pay additional fees to have lost luggage or personal belongings included in your travel insurance to save money.

      Going into retirement is a life change that can be exciting, but also stressful. Take the time to review your needs to make the most of your insurance and save money.