Auto Insurance Considerations for Boomers & Seniors

 

There are benefits to growing older! At this life stage, you may be able to take advantage of several age-related discounts.

• For example, as a mature driver (typically age 55 – 70), you may be eligible for discounts. After age 70, the incidence of serious accidents escalates significantly, so the discounts might cease.


• Discounts may also be available for seniors who limit the amount of driving they do – for example, to less than 7,500 miles per year – or agree to only drive during daylight hours. When you retire or change jobs and work or stay closer to home – and, therefore, need to drive less – you should inform your insurance company. You may be able to get lower rates.


• If you have worked for the same employer for many years, let your insurer know. Those who show stability in their employment may qualify for an auto premium discount.


• If your children have turned 18, left home and are regularly not driving your vehicle, alert your insurance company, as your auto premiums may decrease.


• Consider taking a senior driving refresher course, such as AARP’s 55Alive or a program run by the National Institute of Highway Safety or AAA. Participation in these programs may help you qualify for a discount.


• Since your net worth may still be growing, or is at its highest at this stage of your life, consider whether it makes sense to purchase an “umbrella policy” to raise your auto liability coverage, for example to $1 million, in order to protect your assets.


• If you are driving an older vehicle not worth much in current book value, consider dropping collision insurance. With older cars, the cost of collision coverage can exceed the value of the car.

Home Insurance Considerations for Boomers & Seniors

 

At this stage of your life, you may be in a downsizing mode. So, you can look for ways to bring your costs down by bringing your insurance in line with your scaled back lifestyle. At the same time, be careful to protect assets you have worked so hard to accumulate. Here are some tips:

• Let your insurance company know when you retire. Senior discounts may be available, because you will likely be around home more often and can watch over your home/possessions.


• Consider adding more homeowners liability coverage – and/or an umbrella policy for $1 million. At this stage of your life, you may have more assets to protect in the event you are sued. If you decide on an umbrella policy, note that these policies often cover both home and auto liability, and are separate from your homeowners and auto policies. If you decide to start a home-based business after retiring from your “first career,” consider adding to your homeowners liability coverage.


• In maintaining your residence, you must realize that you are liable for things that happen on your premises. Keep in mind that in many states you could be held legally responsible for the actions of anyone who drinks in your home and then has an accident in your house or after leaving it. Your policy should protect you against lawsuits due to these types of liability issues.


• Reassess the current value of your home or condominium and your possessions to see whether you need to increase or decrease your insurance to cover their replacement costs in today’s market.


• Reassess the value of your expensive possessions, such as jewelry, heirlooms or art – for which you may need a special “floater policy” for extra insurance coverage.


• If the cost of homeowners insurance and other costs, such as maintaining your home, are becoming too high, consider renting instead of owning. Renter’s insurance is typically less expensive than homeowners, as you are insuring your possessions and not the dwelling itself. Recently, some insurers in Florida and the Gulf states raised homeowners premiums by 20 percent to 30 percent following Hurricanes Katrina and Rita, which hit seniors particularly hard.


• If you purchase a vacation home or boat, see if you can consolidate your homeowners coverage from the same insurer and possibly qualify for a multiple policy discount.


• If you’ve just paid off your mortgage – and up until now your homeowners insurance has been paid through your mortgage company – be sure to notify the insurance company to send the premium bills directly to your home address, and remember to pay the premiums on time so that your policy does not lapse, as there is no grace period in a homeowners policy.

Health Insurance Considerations for Seniors & Boomers

 

As you age, health insurance considerations become paramount. Here are several issues you may need to address:

• Plan ahead for retirement. Americans are eligible for Medicare at age 65, so take this into consideration if you plan to retire at an earlier age.

• Are your children still in college full-time? You may be able to cover them under your existing health plan if you are still employed. If your children are in college out-of-state, you may need to explore a health plan through the school or from a private insurance company in the geographic area where they are living for most of the year.


• If you decide to retire or have been laid off from your job before you turn 65 – and you are not yet eligible for Medicare, what do you do?


• Check to see if you are eligible to continue to get health insurance at the group rates from your former employer under COBRA (Consolidated Omnibus Budget Reconciliation Act). COBRA is a federal law enacted in 1985 that typically entitles you to continue your employer’s coverage for up to 18 months. Note that you will be responsible for paying the premiums for this insurance and that you must let your former employer know within 60 days of leaving your job if want to continue your health benefits.
  • If you are no longer employed and your COBRA benefits have run out – but you are still not yet eligible for Medicare – you might want to consider a catastrophic or high-deductible medical plan, which typically carries lower premiums than other individual policies. The caveat here is that people with serious pre-existing health problems – such as heart disease, diabetes or multiple sclerosis – typically can’t get catastrophic health insurance.
  
  
  • Be wary of health discount cards. If you are considering the purchase of a health discount card of any sort – for example, to cover pharmaceuticals, dental care or doctor visits – be sure to investigate whether the insurer is legitimate by calling your state insurance department. Also research how many complaints have been filed against that insurer and find out exactly what is covered and whether your physician/dentist accepts the card.
• Consider whether you still need disability insurance. Important considerations include whether you are still employed, your age, how many years until you are eligible for Social Security, your individual financial needs and your ability to pay the premiums, which typically escalate significantly as you age.


• Carefully evaluate whether long-term care insurance make sense for you. Before purchasing long-term care insurance, do a thorough analysis of your financial situation to be sure you can continue to afford the premiums for an extended period of years – through your old age until death – and figure out whether you have significant savings or other financial assets you want to protect. Many people find they cannot afford the premiums as they get older and get closer to the point when they are most likely to need the coverage. In addition, make sure you know what triggers will result in benefit payments, as well as the likelihood and potential size of premium increases.

Medicare Considerations

 

As you near the Medicare-eligible age of 65, you will need to decide whether you want traditional Medicare or a Medicare Advantage plan.

 

Traditional Medicare includes Medicare Part A, hospital insurance, and Part B, doctor bills. Part A is already paid for through contributions made over your working lifetime. Part B requires that you pay monthly premiums – around $90 per month/per individual – that can be automatically deducted from your Social Security check, if you are already collecting.

 

As you get ready to enroll in Medicare, you may also want to consider purchasing – at incremental cost – a Medicare supplement or Medigap policy to pay for those medical/hospital expenses and deductibles not covered by Medicare. Medicare supplements or Medigap policies are offered by a number of private insurers that have been approved by Medicare.

 

Another option is a Medicare Advantage plan. Medicare Advantage plans, which replace the current Medicare + Choice plans, are offered by some private companies that have signed a contract with Medicare. Before purchasing a Medicare Advantage plan, find out which hospitals are in-network and which doctors are included.

 

There’s been a great deal of attention to Medicare’s newest offering: the prescription drug benefit known as Medicare Part D. If you’re currently receiving Medicare, then you are also eligible for Medicare Part D. To decide whether to enroll, consider the following:

• Do some calculations to see whether the plan is likely to save you money. For example, add up what you spent on prescriptions during the past 12 months and see if that amount is greater, or less than, the annualized cost of Medicare Part D – the premiums plus the deductible.


• Different private insurers have been approved by Medicare to administer this drug benefit. If you decide to enroll, you’ll need to decide which private insurer’s plan best suits your needs. Make sure that the plan you select covers a drugstore convenient to you and the specific prescription drugs you take. Also, make sure the plan is legitimate by calling your state insurance department.


• If you are currently receiving retiree medical benefits from your former employer, call the company’s benefits department to find out how they are handling the new Medicare drug benefit. Recent articles indicate that some companies are considering dropping retiree medical/drug benefits for people who sign up for the new Medicare drug benefit. Calculate which benefits are better for your individual situation.


• Keep your eye on some key dates. You can only make changes to your Part D coverage during certain enrollment periods. Check Medicare.gov for those dates.

Long-Term Care Insurance Considerations

• Investigate long-term care coverage if you don’t want to rely on others to support you, and you want flexibility in choosing the type of long-term care services.


• Long-term care insurance isn’t for everyone. If you are currently receiving Social Security or expect to have minimal or no retirement savings, you will likely qualify for state aid and should not purchase long-term care insurance.


• Research individual insurance companies to see whether they have a history of raising rates for long-term care coverage. Check with your state insurance department to learn how your state regulates rate increases.


• Check with your financial advisor or accountant for guidance on whether long-term care insurance is appropriate for your specific financial situation. If long-term care insurance is for you, shop around for the most appropriate coverage at the best price.


• Make sure you understand what a long-term care insurance policy covers and just as importantly, what it doesn’t. Ask questions and make sure the company is reputable and licensed to sell insurance in your state. If you have concerns about a company, contact your state insurance department.


• Pre-existing conditions, conditions that you have before you apply for the insurance coverage, may be excluded from coverage. In addition, for some policies, age 60 is a trigger for a rate increase. Thus, it may be beneficial to purchase your policy before your late 50’s.


• Don’t rely on Medicare or Medicaid to cover your long-term care needs. Medicare will usually pay for a small percentage of nursing home costs. Medicaid pays for long-term care services but only if you meet federal poverty guidelines, and the choice of care facilities can be very limited.


• Keep in mind that tax breaks are available for qualified long-term care insurance policy premiums. The benefit payments received under such policies are tax-free.


• Do not divulge personal financial or medical information over the phone, such as your social security number, your health status, your Medicare status or your private insurance coverage. Don’t be fooled by mailings about long-term care insurance that appear to be from an official government source. If you are concerned that someone is trying to trick you, contact your state insurance department.


• Be wary of advertising that suggests Medicare is associated with a long-term care policy. Medicare does not endorse nor sell long-term care insurance.

Disability Insurance Considerations for Seniors & Boomers

• Most individual disability insurance policies cut off at retirement age. If you are still employed, you may want to keep your disability insurance in force until you turn 65 or retire.

Life Insurance Considerations for Seniors & Boomers

 

Now is a good time to re-evaluate your life insurance to determine whether you still need as much coverage as you did when your family was younger and you had a large mortgage on your home. Your circumstances have likely changed.

• If you are covered by a group life insurance policy through your job and are planning to retire soon, inquire as to whether you can convert it to an individual policy.


• Review your policies to determine whether you can decrease coverage. Consider these factors:
  • Is your spouse alive?
  • Is your home paid off?
  • What other financial assets do you have in addition to life insurance?
  • Are your children financially independent?
  • Do you have high current debts or anticipate estate taxes that would be a struggle for your survivors to pay off after you die?
• Be sure to update your beneficiaries. For example, has your spouse died or have you remarried?


• If you have a cash value life policy, consider whether you can use some of the money built up in the policy to pay for long-term care insurance premiums, if long-term care insurance makes sense for you.


• Once you reach age 59 ½, you are eligible to withdraw funds penalty-free from your 401(k) or IRA. At this time you may be considering the purchase of an annuity – a contract with an insurance company that promises to pay a series of income payments at regular intervals in return for premiums you have paid. Explore the different types of annuities available:
  • Single premium
  • Multiple premium
  • Fixed
  • Deferred
  • Variable

In addition, make sure you examine whether an annuity makes sense for you in terms of your age and income needs.

 

Ask whether the annuity lets you tap into your principal if you should need it, or whether there are stiff penalty fees. Be sure you understand the fees associated with the annuity, as well as the special tax treatment of annuities, namely that income tax on annuities is deferred until you start receiving the income payments.

 

If you are strapped for cash and are considering selling your life insurance policy to a third party in return for a sum of money, called a life settlement, carefully consider the impact on your beneficiaries and whether it will affect your eligibility for any other public assistance you may be receiving. Also, before you make any decisions, be sure to check out the legitimacy of the company to which you are considering selling your policy by calling your state insurance department.

 

If you are considering the purchase of a “Final Expense” policy – a small whole life policy, usually with coverage under $10,000 and often sold to seniors up to age 85 – be aware that some are sold as guaranteed issue and come with steep charges. Furthermore, they typically don’t pay a full benefit in the first two or three years of the policy.

Considerations for Raising Grandchildren

 

A special challenge facing grandparents is that state and local governments, communities and schools may not formally recognize their role in raising their grandchildren. While acquiring legal custody and guardianship of a grandchild may be financially and emotionally burdensome, grandparents should be aware that many benefits, including healthcare, emergency care, financial assistance and social security benefits, require proof of a legal relationship before they will help. Proof typically includes court guardianship papers or adoption papers.

 

To help grandparents raising grandchildren better understand their insurance needs, the National Association of Insurance Commissioners offers tips and considerations regarding auto, home, health and life insurance.

 

Auto Insurance Considerations for Raising Grandchildren

 

You will likely assume additional chauffeuring responsibilities when caring for your grandchild and his/her friends. Consider increasing your liability insurance to make sure you are covered in case of an accident. You may also want to consider purchasing a Liability Umbrella Policy to protect your assets.

 

If your grandchild is old enough to drive your car, make sure to name him or her as a secondary driver on your policy. Be prepared to pay higher insurance rates as teens are considered a higher risk. You may want to recommend listing them as an insured since an insured has more rights under a typical auto policy than a listed driver. The drawback, however, is that a claim check may have all the insureds listed as a payee.

Many auto insurance companies offer lower insurance rates for teenage drivers who complete driving courses and maintain good grades. Check with an agent about the most cost-effective way to secure coverage.

 

Home Insurance Considerations for Raising Grandchildren

• When caring for a grandchild and his/her visiting friends, consider increasing your liability coverage through an umbrella policy in the event that someone is injured on your property. Remember that backyard items, such as a trampoline or pool, may require an increase in liability coverage.


• Keep in mind that if your adult grandchild rents from you, he/she might not be covered under your standard homeowners policy. Contact your state insurance department to find out what is covered and if a renter’s insurance policy might be needed.

 

Health Insurance Considerations for Raising Grandchildren

• Your grandchild may be eligible for government health programs. According to the AARP, a grandparent can apply for a grandchild to be covered by Medicaid or State Children’s Insurance Program in any state. Most states do not take grandparents’ income into consideration when applying for a grandchild’s health benefits. Check with your state insurance department to find out if your grandchildren qualify.

• If you are still working, contact your human resource department and health insurance company to find out whether your grandchild is or can be covered under your policy. You will likely have to prove that you have legal guardianship of the grandchild in order for your insurance provider to accept him/her as a dependent child.

 

Life Insurance Considerations for Raising Grandchildren

• If you do not have a life insurance policy, consider purchasing term insurance - life insurance issued for a limited period of time. Term policies are less expensive than whole life policies, but keep in mind that most companies will not sell them for a term that ends past your 80th birthday.


• Never leave a life insurance benefit directly to a minor child; instead make sure the policy names a contingent beneficiary or a trustee who will act as a beneficiary on behalf of the child. Otherwise the life insurance benefit may not be accessible to the child until the issue is processed through court. You may want to set up a family trust with your selected trustee in charge.