Estate Planning Guide 2011: What you need to know about insurance in your golden years

Monday, March 7, 2011

Life insurance

Most people, by the time they're ready to retire, have already paid off their cars, home and children's college tuition. For that reason, Mike Tomlin of Senior Healthcare Benefits Services in Jackson believes most seniors can pare down or eliminate their life insurance policies.

"At age 65, life insurance would be for your final expenses if you don't have money in the bank or if you want to leave something for your kids and grandkids," says Tomlin. "But in general, the answer is that you don't need a lot of life insurance at this age."

Those who do keep a life insurance plan should shift the focus to estate planning, or what can be done for the successorship of assets and properties, says Rock Finch, owner of Marathon Benefits Group in Cape Girardeau.

"At the very base level, life insurance can be a way to help with final expenses related to funerals and medical expenses," explains Bob Houchins, financial representative with Modern Woodmen of America in Jackson. "You can relieve stress and uneasiness for the family by using life insurance as a vehicle to make sure those expenses are covered. We also talk with seniors, when it comes to life insurance, about the ongoing need for income for the surviving spouse."

When it's time to retire, says Houchins, you'll want to weigh your retirement plan and life insurance plan, determining which will have the greater payout and how you will transfer the maximum amount to your spouse, heirs or another institution. He recommends making this process a team effort with your attorney and a financial professional.

"The value of life insurance is not only a protection mechanism for an unexpected death, but also a wealth accumulation mechanism for those who have the longevity of time on their side," says Houchins.

Disability income insurance

You'll probably want to reduce or remove your disability income insurance as you get older, says Finch, probably around the mid-40s.

"Your chances of becoming disabled at an older age are greatly reduced," he explains. "One reason is that you're not going to live long enough. If you're younger when you're disabled, you might live a long, long time. If you're disabled when you're older, you're not going to live as long."

Houchins adds that disability income is typically only available to those in the workforce up to age 65.

"At age 65, most people become eligible for government programs, so the insurance is no longer needed," he says. "But with many senior adults working well past 65, it is wise to check with the HR person for your employer to see what options are available."

Long-term care insurance

"Long-term care coverage is more of an urgent need as you redo your life insurance and diminish the cost of disability insurance," says Finch. This coverage pays for services such as in-home care, a nursing home, assisted living facility and adult day care facilities, says Houchins. Seniors may also purchase extra features, or riders, such as a cost of living adjustment, says Finch.

Even if you've paid all your debts and built up a sizable nest egg, says Tomlin, a nursing home stay of thousands of dollars each month will be hard to handle -- especially if you or your spouse lives there for years. The last thing you want is to go to a nursing home without any assets, so start planning your long-term care insurance in your mid-50s, Finch advises.

Because long-term care insurance premiums are based on an individual's age and health at the time of application, Houchins recommends that seniors purchase a long-term care plan while they are still relatively young and in good health.

Final needs expenses

Some seniors purchase life insurance policies to help pay for funeral expenses after they're gone, says Finch. He recommends that all seniors visit a funeral home, decide what they want for their funeral, put it on paper, and lock it in a safe-deposit box. Once you've calculated the expenses, you can decide how to pay for your final needs.

"A lot of people don't like to do that, but in my opinion you need to go to a funeral home and determine what final needs you would like to have so that others don't have to make a decision for you," says Finch. "A funeral home can help you walk through it and see what the cost would be. You can then pay for it out of your assets or out of a policy."

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