Financial Tune Up - What to Look For When Reviewing Insurance Policies

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Our topic on this episode of the Ready for Retirement podcast is part three of the financial tune-up series: What to Look For When Reviewing Insurance Policies.

Questions answered: What do I need to look for when looking at insurance policies? What strategies can I implement to improve my financial future? What is the best approach for my individual situation?

Are you ready to start focusing on the things that truly matter when it comes to your financial future?

Checklist – What Issues Should I Consider When Reviewing My Health & Life Insurance Policies?

Checklist – What Issues Should I Consider When Purchasing Long-Term Care Insurance?

Key Points

What is the need for insurance?
- To protect us against things that could create a devastating situation, financially.
  - The need for insurance changes over time.
  - Insurance at one time in your life may not make it appropriate at another time in your life.
Health Insurance
- Does each spouse have an employer-sponsored health plan?
  - If so, review both options to determine what’s best for you.
    - Review deductibles, premiums, copays, out-of-pocket expenses, HSA matching, in-network doctors to ensure you’re receiving the best policy for your needs.
- If you are paying for health-insurance coverage on your own, consider the following:
  - Your coverage may automatically renew, but make sure you view other plans before allowing it to auto-renew.
  - Review the total cost of your plan by reviewing the following: review deductibles, premiums, copays, out-of-pocket expenses, HSA matching, in-network doctors to ensure you’re receiving the best policy for your needs.
  - Eligibility changes based on your family and as circumstances change.
Medicare
- Review Medicare Supplement & Advantage plans when offered in a new location.
  - If you are hoping to retire in another state, ensure to review plans in that new location.
- If you have lost creditable drug coverage, avoid lifetime penalties by enrolling in Medicare Part D within 63 days.
Life Insurance
- Do you still need it? Life Insurance isn’t needed throughout your whole life.
  - Life Insurance is needed when there is a financial dependence if you were to pass away.
  - If you don’t have significant expenses and are financially independent, you may be in a position to self-insure.
  - Has there been a change to life insurance coverage?
    - Has a life insurance policy lapsed?
    - Does your employer offer life insurance?
- Do you own whole/life insurance?
  - Request an illustration to view performance to understand whether or not you should be investing otherwise.
    - Consider keeping the policy if the policy is self-sustaining and provides a death benefit.
    - It often makes sense to stop paying all together when you realize how much further your money could go investing in the market.
- Do you own term life insurance?
  - If your insurance policy will lapse in 5 years, do you wait 5 years to get a new policy or do you get a new policy now, knowing that your first policy will lapse?
    - Example: Today you want $1,000,000 of coverage.
      - In 5 years, you realize you need $500,000 of insurance.
      - You’re buying a policy you need 5 years from now knowing that you’ll need less coverage, while getting the premium at a time where you’re healthy (as we don’t know where health will be if you were to apply in 5 years).
  - Review owners/beneficiaries
    - Do you need to remove an ex-spouse as a beneficiary?
    - Do you need to add children as a beneficiary?
  - Do you need an irrevocable life insurance trust?
Disability Insurance
- This is one of the areas where individuals are most under-insured.
  - If you work for a corporation, long-term disability insurance may be included with your benefits package.
  - If not, the odds of you becoming disable to work, that may be more financially devastating than passing away.
  - Has there been a change in employer coverage?
  - Is the disability insurance provided by your employer sufficient?
    - Example: If your disability policy with work offers a 60% benefit and you live off $10,000/month, you may want to explore self-insuring the additional 40%.
- Social Security
  - If you become disabled, you may be eligible for Social Security disability.
    - If you are eligible, your Social Security amount at full retirement age benefit is the amount you can collect as a Social Security disability benefit.
- Private Disability Insurance
  - Consider purchasing private disability insurance that follows you regardless where you are employed.
    - Understand waiting periods, coverage amounts, etc.
      - Waiting period: the time between when the disability event occurs and when the benefit will be paid.
        I recommend having an emergency fund of 3-6 months to ensure you’re in a position to meet living expenses at all times.
Long-Term Care Insurance
- If you don’t have LTC Insurance policy, age 60 is the time most individuals begin to explore LTC and its benefits.
  - If you get a LTC Insurance prior to age 60, it may be too expensive.
  - If you get a LTC Insurance after age 60, premiums may be quite expensive and it may prove counterproductive to get a policy.
- Determine if you need Long-Term Care.
  - Long-Term Care Insurance can be expensive.
    - You may realize you would be okay if you didn’t get a Long-Term Care Policy and may benefit from not paying the high premiums, if you know your investments are in a sufficient position to cover medical issues.
  - Understand Long-Term Care benefits.
    - Is it home care? Is it outpatient benefits?
      - Understand and review the amount you purchased.
        Is it a fixed amount or adjusted for inflation?
        How long is the elimination period?
        Do you have any inflation riders?
- Do you currently hold a Long-Term Care policy?
  - Have you received any notices of a premium increase?
    - It’s not uncommon for insurance companies to increase the premium.