Retirement isn’t the end of your insurance needs. The needs simply shift.
While you’re working, insurance protects your income. It steps in if you become disabled or die before reaching financial independence.
But once you retire, the focus changes. Insurance now exists to protect your lifestyle and legacy from risks that could derail your plan.
In this post, we’ll walk through the most important types of insurance to consider in retirement and when each one might (or might not) make sense.
Life Insurance in Retirement
The question hasn’t changed: Is anyone financially dependent on you?
If, once you are retired, your dependents will no longer be financially at risk if something happens to you, then your need for life insurance is probably much less.
Most term life policies expire by the time you retire or shortly after. If yours hasn’t, and the premium is low, you might choose to keep it in place a little longer, just in case. But chances are, you don’t need it anymore.
If you currently hold any permanent life insurance policies (such as whole life or universal life), it’s worth evaluating whether they still align with your goals, sometimes people choose to keep their permanent life insurance. Depending on your needs, you might choose to keep the policy as is, reduce the death benefit to lower premiums, take withdrawals or loans from the cash value, or surrender the policy entirely. These decisions can have tax and planning implications, so it’s a good idea to review them with a financial planner, tax professional, or insurance professional before making changes.
Long-Term Disability Insurance
Once you’re retired, your income no longer depends on your ability to work. That means you no longer need disability insurance.
Most policies end at age 65 to 67 anyway. Make sure your income strategy accounts for that expiration.
If you are still working part-time in retirement, you can likely opt out of disability coverage, assuming your portfolio could support you if needed.
Umbrella Liability Insurance
A common rule of thumb is to consider umbrella insurance once your net worth reaches $1 million.
Umbrella insurance is relatively inexpensive and provides extra liability protection beyond your home and auto policies. This can be an important safeguard against lawsuits.
Umbrella liability coverage is especially important for retirees with visible or substantial assets, such as a paid-off home, large investment accounts, or a recognizable public presence. These assets can make you a more likely target for lawsuits. If you cause a serious car accident or someone is injured on your property, an umbrella policy provides additional protection beyond your auto and homeowners coverage. This not only helps protect your wealth, but can also reduce the likelihood of a drawn-out legal battle, since having adequate coverage often makes it easier to reach a settlement.
Employer retirement plans are generally protected from lawsuits under federal law. IRAs, however, are only protected up to certain limits and vary by state. Talk with your property and casualty agent, financial advisor, or estate attorney to make sure you are properly covered.
Health Insurance (Quick Note)
I’ll cover this and long-term care insurance in more depth in the next post, but here is a quick summary.
In retirement, health insurance usually means transitioning from your employer coverage to Medicare plus a supplemental or advantage plan.
I generally recommend Medigap supplemental plans over Medicare Advantage (Part C). The “free” Advantage plans may limit your coverage, and you may not be able to switch back to Medigap later.
Healthcare will likely be one of your largest retirement expenses. Make sure you evaluate your options carefully.
Other Considerations
- Auto and Homeowners or Renter Insurance: Keep your coverage up to date. For auto insurance, be sure to update your usage and mileage estimate with the insurance company if you are retired and driving less. It could lower your premium.
- Identity Theft Protection: This is not technically insurance, but it is still worth discussing. As you age, you may become a more frequent target for scams and fraud.
Final Thoughts
Retirement is the perfect time to review your insurance and drop what no longer applies.
The goal is to reduce unnecessary premiums while still protecting yourself from real risks that could disrupt your financial future.
If you are unsure what to keep, consider meeting with a fee-only financial planner who can review your coverage and offer recommendations without selling you anything.
Together Planning is a registered investment advisor. The information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Together Planning has a reasonable belief that this marketing does not include any false or material misleading information statements or omissions of facts regarding services, investments, or client experiences. Together Planning has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein.