Liz Pulliam Weston

The Basics

Retiring? Here's the insurance you still need

Fact is, you can probably jettison some policies. But there are others you shouldn't go without. Here's a handy guide.

By Liz Pulliam Weston

The average American's wealth peaks in the early years of retirement, which means you may have more to lose than ever before. Here's the insurance you should think about:

Health insurance

Medicare coverage doesn't kick in until you're 65, so if you're planning an early retirement, you'll need to factor in the costs of paying for your own coverage for several years.

Buying a policy on your own can be expensive, especially because individual health insurance policies get more costly as we age. Going without insurance, however, is too big a risk to take -- one illness or accident can wipe you out financially.

If you can't qualify for a group policy (say, through a professional association or other large organization) and you find the individual premiums for standard insurance too high, consider buying a high deductible or "catastrophic" policy. The monthly premiums will be lower than for standard coverage, although in the event of a pricey health problem, you'll have to pay quite a bit out of your own pocket ($1,000 to $5,000) to meet the deductible before the coverage kicks in.

Liability insurance

With more assets than ever, you could be at an even bigger risk of being sued. Make sure you keep the maximum available liability coverage on your homeowners and auto insurance.

If your total liability coverage doesn't at least equal your net worth, consider adding an umbrella or personal liability policy (see "4 ways to protect your financial freedom") or increasing the limits on the umbrella policy you already have.

Long-term-care insurance

This type of policy covers expenses that health insurance and Medicare typically do not: the costs of a nursing home or home care if you're too disabled or ill to take care of the basic functions of daily living, like feeding, bathing or dressing, by yourself. The costs of such care typically start at $60,000 a year.

If you have plenty of assets -- $1 million or more -- and aren't worried about leaving an inheritance, you may decide to skip the insurance and use your wealth to pay for any care you need. If you have few assets, you're likely to qualify for Medicaid, the government health plan for the indigent, which covers nursing home costs.

Video: Do you need long-term care insurance?

If you're somewhere in between, or you're determined to protect your assets for your kids, then long-term-care insurance might be a wise option. Many financial planners say the best time to buy the insurance is in your mid-50s to early 60s.

For more information, visit the Web site run by H.E.L.P., a not-for-profit organization that educates seniors about financial matters.

Continued: Homeowners insurance

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