- June 19, 2019
- Bob Quinn
You might notice, as you approach retirement, that you have a plethora of standing orders going out of your bank account to various life companies for life assurance. Around retirement age, with a probable drop in income coming up, it’s worth putting them under the microscope.
We usually take these policies out when we start our families. We want to protect our dependents in the event that anything should happen to us. We’re insuring against the loss of our income. It makes sense at that stage of our lives.
But when those little people are all grown up and financially independent, what exactly are these policies for?
A certainty and a possibility
At any stage in your life you are concerned with protecting you and your family against two things:
One of them is definitely going to happen – that’s death (sorry, but it’s true) – and the other is a possibility – that’s illness.
At retirement age, the prospect of both eventualities becomes more real. It also becomes more about you and your spouse than your children, because they’re up on their feet now.
That’s why this is a good time to refocus your ‘protection’ as the financial services industry calls it. It’s time to let the income protection policies go and to look at some other policies.
Section 72 and Funeral Plans
If it looks like your net worth will visit inheritance tax burdens on your children, there is one insurance policy you could look at. It’s called a Section 72 whole-of-life policy and it insures against future inheritance tax bills. There is a major drawback to certain whole-of-life policies that are ‘reviewable’ – I wrote about it back in July 2018 – so proceed with caution but a Section 72 policy may be worth considering if your net worth is high.
If you’re concerned about your funeral costs or the cost to family members who live abroad of coming home for the funeral, you can take out a whole-of-life policy that covers funeral expenses including the cost of family flying in for your funeral.
Here too you need to pivot your protection away from your income. What’s more important in the years to come is your quality of life in illness.
Put the money you save on income protection and serious illness cover towards the very best private health insurance plan you can afford. Bear in mind that where you move to a different plan you may face a waiting period before cover kicks in for any conditions you already have.
Use family medical history to prepare for the future
Look at your family history. Is there a high incidence of any particular illness or condition? It is useful to be armed with this information when selecting your cover. Make sure you have hospital care in the specialist hospitals for those conditions. In general, make sure you are covered in hospitals and clinics convenient to you.
That way, you’ll have the peace of mind that comes from knowing you won’t have to worry about medical care should you need it.
That’s what insurance is for, giving you peace of mind, but if you’re protecting the wrong thing, you’re as exposed as the person who has no insurance at all.
Remember, retirement time is a fantastic opportunity to break from the old and do something new and better.