Retirement can be stressful because you may have to make important financial decisions without knowing what the future holds. One of these decisions could involve insurance, but with so many options, it can be hard to know where to start or what would be best for your situation.
While most people tend to focus on insurance options once they are retired, there are some smart options you can consider as soon as 10 years before you retire, and it could save you a lot in the long run. It's never too early to start planning financially, especially if it means that you can afford to live an even better retirement lifestyle than you already envisioned.
It's never too early to start planning for retirement, but if you want to ensure your retirement lasts as long as possible, you'll need to plan long before you retire. While there are several different health insurance policies, this article highlights five that make sense to consider at least 10 years before you retire.
1. Consider Buying a Retirement Plan
A retirement plan can be a great way to supplement your income and provide financial security in your later years. Besides health insurance, there are many different types of retirement plans, such as pension plans, so it's important to do your research and find the one that best suits your needs.
Today, insurers offer special market-linked and non-market-linked plans, including a death benefit, life cover, guaranteed bonus, and maturity benefit.
Generally, the costs for these plans will vary depending on your age when you retire. To decide the right plan for you, consider factors such as how long you think you'll live after retiring and how much money you want at retirement age.
2. Review Your Health Insurance Portfolio
One of the most important things you can do to protect your health is to ensure that you have adequate health insurance. So, you will need to review your plan, assuming you buy it in your 20s or 30s to reduce your premium payments drastically compared to doing so 10 years before retirement. But what one should do 10 years before retirement is increase the sum insured to deal with the rising healthcare expenses. The premium will rise but the expectedly high income at that stage will help you accommodate the same.
Ten years before retirement you may be enjoying the benefits of a group health insurance plan offered by your company. But that may not be valid once you leave the company. As you get into your 50s, many companies may not hire you. So, having a personal health insurance policy with the desired sum insured as per the prevailing healthcare inflation is paramount.
3. Contemplate an Insurance Plan Offering Life Cover and Savings
With a life cover and savings combined policy, you're getting the best of both worlds. Your family will be taken care of financially if something happens to you, and you'll also have money put away for retirement. This policy can give you peace of mind, knowing that you and your loved ones are taken care of.
They may cost more than other policies, but when it comes to insurance coverage, it's worth it. The earlier you start considering this option for yourself and your family, the better off you'll be in the long run. Find out about different plans available and choose one that suits your needs.
Consult with an agent or advisor to see what would work best for you and your family so that you don't regret not taking steps sooner.
4. Look for Loan Protection Plans
Loan insurance is a type of insurance that can help pay off your car or home loan if you die. This can be a good option if you're worried about your family's ability to make loan payments after you're gone. There are two main types of loan insurance: term life insurance and whole life insurance. Term life insurance covers you for a period of 10-20 years.
Whole life insurance covers you lifelong as you keep paying the premiums. Whole life coverage includes some money back in the form of dividends or policy cash value, but it also has an ongoing cost, so it may not be the best choice in all cases.
5. Consider Diverting Some from Equity Holdings to Low-risk Financial Instruments
Investing in equities has serious advantages; the sooner you start, the greater your chance of accumulating the desired retirement corpus. However, as the risk appetite changes over time, it calls for a rejig in your investment portfolio. A waning risk appetite, which will likely be the case 10 years before retirement, calls for shifting some from your high-risk equity holdings to low-risk financial instruments such as money-back plans, fixed deposits, etc. Also, you will likely be around 70% of the retirement corpus you may have planned through equity investments at that stage of your life.
A money-back policy is a type of life insurance where the insurer returns a part of the sum assured to the policyholder at regular intervals.
This type of policy is ideal for those seeking a regular income from their investment. To begin with, how much money do you need to live on in your retirement? Once you have an estimate of your expenses during retirement, it will be easier to decide how much cover you want for that period.
It is a good idea to check your policy once in a while and increase or decrease your coverage accordingly. The premiums of a money-back plan usually remain constant and can be adjusted only once every three years, making it suitable for long-term insurance needs.
A fixed deposit, on the other hand, can be booked with a bank for a tenure ranging from 7 days to 10 years. The interest rate on the same can range around 5-7% per annum on average.
Conclusion
Retirement planning is a long-term process, and your insurance needs will change over time. However, there are some types of insurance you could consider at least 10 years before you retire.
These include life insurance, health insurance, long-term care insurance, and disability insurance. Retirement can be an extremely exciting time in your life, but it can also feel like an overwhelming prospect if you don't know what to expect and haven't prepared well enough in advance.
However, one important aspect of planning your retirement that few people consider adequately enough is insurance. The right insurance can protect you from financial catastrophes, both big and small, and it's wise to consider which options are best suited to your needs at least 10 years before you retire so that you have adequate coverage.
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