During your working and accumulation years, there are many different types of financial risks that you may face. These can include the ups and downs in the stock market, low interest rates, and rising prices on goods and services you need to purchase.It is also possible that you could face various emergencies and events that might impact your financial situation. For instance, the death of a spouse or loved one, an unexpected medical emergency or condition, and/or the theft and compromising of your personal and financial information.When you retire, most of these emergencies could still occur. So, it is essential that you put various protections in place so that you can keep your income and assets intact, and maintain your lifestyle without having to make significant adjustments. Types of Financial ProtectionOne of the best ways to protect yourself financially is through insurance coverage. Typically, in return for a premium payment, an insurance policy will pay out a claim if a qualifying instance occurs.Because of this, it can prevent the need to dip into savings or other assets in the event of an insured event. Having insurance proceeds available can also help you to avoid putting these expenses on a high interest credit card, in turn, costing you even more.There are many different types of insurance coverage that can offer you financial protection in retirement. These include:- Life Insurance– Health Insurance / Medicare– Critical Illness Insurance- Long-Term Care Insurance- Identity Theft Insurance- Income Insurance Life InsuranceIf there is anyone who would face a financial hardship upon your passing, you may need life insurance. With this type of coverage, proceeds are paid to a named beneficiary (or beneficiaries) if the insured dies while the life insurance policy is in force. Typically, life insurance proceeds are income tax free, so the entire amount may be used for various needs of the insureds survivors, such as:- Income replacement including lost retirement income from Social Security, pension, etc.- Childcare expenses- Payoff of debt obligation(s) including a home mortgage- Payment of a funeral and other final expenses- Future college costs for children or grandchildrenThere are two primary categories of life insurance. These are term and permanent. Term life insurance provides death benefit protection only, without any cash value build-up. Because of this, term insurance is oftentimes affordable especially if the insured is young and in good health at the time of application.However, as its name implies, term insurance only provides coverage for a pre-set time period, or term, such as 5 years, 10 years, 20 years, or 30 years. There are also 1-year term policies available.The other life insurance category, permanent, provides death benefit protection and cash value. The funds that are in the cash value grow tax-deferred, meaning that there is not tax due on the gain if or until the funds are withdrawn.Unlike term life insurance, permanent coverage will continue, as long as the premium is paid. Therefore, even as the insured ages and if he or she contracts an adverse health condition they will still be covered.In some cases, the cash value of a permanent life insurance policy may also be used for other needs, such as borrowing for the purchase of a home or vehicle, supplementing retirement income, or financing long-term care expenses. Health Insurance / MedicareToday, people are living longer than they did in the past. But all of these extra years do not necessarily equate to healthy living. Thats why healthcare can be one of the biggest expenses in retirement.It is estimated that an average retired couple that is 65 in 2021 can anticipate spending approximately $300,000 in healthcare costs throughout their remaining lifetimeand this figure does not include the cost of long-term care.This is why it is essential to have good healthcare insurance coverage. Otherwise, medical and health-related costs alone could deplete a lifetime of savings. If you are age 65 or over, and you (and/or your spouse) worked and paid into the Medicare system, you are eligible for this coverage.There are different parts to Medicare. For example, Part A covers various inpatient hospitalization costs, as well as some skilled nursing facility expenses. Medicare Part B provides coverage for doctors services and necessary medical supplies and equipment (such as wheelchairs and walkers that are deemed by your doctor to be required). Part D of Medicare pays for prescription medications.As an alternative, Medicare Advantage which is also often referred to as Medicare Part C pays the same costs as Medicare Parts A and B. Many Medicare Advantage plans will also provide benefits for items that are not covered by Medicare Part A and Part B, such as dental and vision coverage.Medicare typically requires various out-of-pocket expenses, such as deductibles, copayments, and/or coinsurance costs. Some Medicare enrollees are eligible to purchase a Medicare Supplement insurance policy that can help with the payments of these expenses. Critical Illness InsuranceIf you are diagnosed with a particular health condition, such as cancer, stroke, or other covered ailments, a critical illness insurance policy can pay out a lump sum benefit and the proceeds may be used for any reason.There are many different types of critical illness insurance. Depending on the policy, you could be covered for conditions such as:- Coma- Paralysis- Alzheimers disease- Organ transplant- Kidney failure- Bypass surgery- Angioplasty- Heart attack Long-Term Care InsuranceOne of the other dangers that could befall your retirement savings and income is the need for long-term care services. According to the Genworth 2020 Cost of Care Survey, the average monthly price tag for a semi-private room in a skilled nursing facility is $7,756, and $8,821 for a private room.Receiving care at home can also be costly, with the average 2020 cost of homemaker services in the U.S. at nearly $4,500 per month, and home health aide services at just under $4,600 per month.While Medicare pays for some skilled nursing home expenses, the coverage is minuscule, and can also be difficult to qualify for. As an example, the condition for which you are receiving care must be recuperative. Therefore, ongoing chronic conditions like Alzheimers disease, wont typically be approved.Even if you do qualify for this type of coverage through Medicare, you could still find yourself paying a significant amount of money out-of-pocket due to the high coinsurance requirement, as well as the short-term expiration of these benefits. Medicare Skilled Nursing Home Out-of-Pocket Costs (in 2021) Days: What you pay: Days 1 20 $0 for each benefit period Days 21 100 $185.50 per day coinsurance Days 101 and beyond All costs Source: Medicare.gov Identity Theft InsuranceIdentity theft is one of the fastest-growing crimes in the U.S. and around the world today. With very little effort, identity thieves can obtain personal and financial information from unsuspecting consumers and businesses and can literally wreak havoc within minutes of the crime taking place.Just some examples include hacking into (and draining) bank and other financial accounts, obtaining information and benefits from a Medicare enrollee, luring people in under the guise of a loved one in need and asking to send large sums of money. In some instances, people may never recover the financial impact of this type of crime.With identity theft insurance, you may be able to obtain reimbursement for some or all of the funds you need to pay in order to repair the damages. Many of these policies cover other items, too, such as:- Legal fees- Lost wages- Mail costs- Notary fees- Phone bills Income InsuranceWhile many people see the benefit of insurance coverage for healthcare costs, vehicle repairs, and identity theft, few consider insuring their retirement income. But thats just exactly what an annuity can do for you.Annuities are designed for paying out an income stream for a preset time period such as 10 or 20 years or even for the remainder of your lifetime, no matter how long that may be. These financial vehicles may provide other benefits, too, such as tax-deferred growth, protection of principal (in any stock market environment), waiver of surrender charges for a terminal illness and/or long-term care need, and legacy protection in the form of a death benefit.There are different types of annuities, though, so it is important that you discuss your short- and long-term financial objectives with an advisor who is well-versed in these products in order to narrow down the right one for you.
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