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Factoring Insurance Into Your Financial Plan

Financial Planning Retirement Planning

Picture yourself on a lake. The calm water cools your hand as the sun creates reflections of gemstones in the ripples. Sunscreen drips off your arm and falls on the pages of your open book. Your children giggle as the boat sways back and forth from the waves. Today is a good day. But even on the best of days, every time you take the boat out you ensure that your life jacket is inside-- just in case.


Insurance acts as a life vest, keeping you afloat in difficult times. Framed in a mindset of care, insurance is one way to protect your loved ones in the event of your inability to. As you near retirement, it is a good idea to think about the type of insurance you may need going forward. Below, I have outlined the pros and cons of 3 main insurance plans: life insurance, health insurance, and long-term care insurance. This list is meant to give you an idea of what lay just beyond the horizon, and how insurance plans could fit into your financial strategy.


1. Life Insurance


Insurance, as a concept, is built to come to your aid should an accident occur. With any insurance plan, you pay a premium and in exchange the company takes on any unknown or unforeseen risk you have.

Life insurance works in a similar vein. If you and your family rely solely (or partially) on

your income to pay the bills, a life insurance policy could be a valuable asset. Upon your passing, the insurance company would pay the allotted amount of money you set up to your family to cover a myriad of costs: mortgage, debt, credit cards, living expenses, schooling. Life insurance plans are also quite flexible and come with many tax benefits, which are important considerations. Retirees should come up with a life insurance plan unless they have already made other provisions to take care of and protect their loved ones upon their passing.

However, not all plans are built the same and a life insurance policy may not be the right

move for you. These plans come with a high price tag, meaning that it may not be an affordable option for you and your family. Quite often with insurance, you feel as though you are being sold. This tends to make people uncomfortable. Don’t engage in any financial decisions that make you uneasy. Do some research, talk with a financial advisor, and discuss options with your family to come to the best conclusion.


2.  Health Insurance


Entering into retirement, health insurance is one of the primary factors you should be considering. On average, a healthy 65-year-old couple will spend about $240,000 in medical expenses during retirement. That number would be exponentially higher without the protection of health insurance. Health insurance affords you the freedom to attend doctors’ visits without a substantial co-pay, it also ensures your ability to pay for any necessary prescriptions, and protects you in case of an emergency health situation like a surgery or hospitalization.

There are many different types of health insurance plans, and they are important to look

through so that you can assess your needs moving forward. Health coverage in any capacity is extremely important for retirees because it marks the time in their lives that they may be most in need of medical visits and supplies. It would be unwise of me if I did not recognize the expense that is attached to health insurance plans. Quite often the plans are expensive and require significant contributions, which is why it is important to shop around for a plan that will meet your needs. Not caring health insurance could be a huge detriment to you and your family. You can’t always foresee the future, therefore it is best to plan in the present.


3.  Long-term Care Insurance


Do you remember the magic 8 balls that were popular in the 90s? You would ask the ball a yes or no question, shake it, and it would spit out an answer. This toy is not accurate and cannot predict the actions you will take nor the situations you may have to face in the future. This example illustrates many concerns about long-term care insurance.  

Long-term care is a unique need, and one that is highly unpredictable. Should a

particular ailment keep you bedridden and needing additional care, long-term care insurance could be a course of action for you. Long-term care insurance covers in-home care or nursing home care for a patient for an allotted amount of time, most plans will cover at most 3 years and about $150 a day. These numbers are an average and alter with each plan. Should long-term care be required, having this insurance could save you so much in medical expenses.


These plans are notorious for being costly and unpredictable. Presently, many premiums on these plans are rising on an average of 83%. It is important to read the fine print on long-term care policies so that you are fully aware of when, where, why, and how you or your loved one can receive the benefit that is being paid for.

For example, many plans will not begin payments until the patient is unable to perform tasks on the list they provide and if they are under the care for at least 90 days. These plans also come with taking a test/physical before being able to purchase the insurance, meaning many people are denied coverage. The benefits of this insurance policy can be hazy to some due to its volatile nature and many hurdles. Insurance is there to protect you and your loved ones in case of a health emergency or death.


Many of these plans are customizable and should be looked at as such. It is important to view insurance as a way to protect your loved ones, a gift you can give to them. Review your options, and see which (if any) will be right for you in retirement.