It is a time to enjoy retirement and take it easy, not to worry about finances. However, many retirees concern themselves with possible gaps in health coverage and unexpected expenses. That is where supplemental insurance comes in. In this article, we will look at the different supplemental insurance options available to you as a retiree. We will help you understand how those policies can give you a thin veneer of financial security during your golden years.
With increased age, so do our healthcare needs increase, and so do the accrued costs. While Medicare might cover most of the needs that a retiree may have, it does not quite cover it all. Supplemental insurance provides that little bit more peace of mind and financial protection against a variety of potential expenses.
Supplemental insurance for retirees can be explored further by getting into details about the different policy types, their benefits, and how to make appropriate choices for your particular situation.
- Medicare Supplement Insurance (Medigap)
One of the most common types of supplemental insurance for retirees is Medicare Supplement Insurance, commonly referred to as Medigap. These policies work directly with Original Medicare-Part A and Part B-to cover some of the out-of-pocket costs that Medicare doesn’t pay.
How Medigap Works
Medigap policies are offered by private insurance companies, but most states have standardized the policies. Currently, there are 10 different Medigap plans, labeled A through N. Each plan offers a different level of coverage so that you can select one that best suits your needs and budget.
Key Benefits of Medigap:
- Covers Medicare deductibles and copayments
- May provide coverage for emergency care when traveling abroad
Pays part of the skilled nursing facility coinsurance Some plans cover Medicare Part B excess charges When choosing a Medigap policy, it’s important to compare the different plans and their premiums. The benefits for each letter type will be the same, but the premiums may be higher for one insurance company than another. 2. Medicare Advantage Plans (Part C)
Medicare Advantage plans, also known as Part C, serve as an alternative way to receive your Original Medicare benefits. These plans are offered by Medicare-approved private insurance companies, which provide all your Part A and Part B coverage and usually other benefits.
How Medicare Advantage Plans Work
According to Medicare, some features of these plans include:
- Usually cover prescription drugs (Part D)
- Sometimes include dental, vision, and hearing coverage
- Some include gym membership or wellness programs
May have lower out-of-pocket costs compared to Original Medicare
Though not technically supplemental insurance, Medicare Advantage plans may be a strong choice for retirees looking for comprehensive coverage from one plan. Remember, though-you can’t have a Medicare Advantage plan and a Medigap policy.
- Prescription Drug Coverage, Part D
One of the biggest continuing expenses for many retirees is prescription medication. Medicare Part D plans are designed to help defray some of the costs by providing insurance coverage for prescription drugs.
Understanding Part D Coverage:
Plans are offered through private insurance companies that are approved by Medicare
Coverage can be provided either on an individual basis or as part of a Medicare Advantage plan
Not all plans cover all of the same medications, so careful checking of the formulary is important
Programs are offered to have different levels of coverage that have varying copayments or coinsurance
When selecting a Part D plan, consider medications you are currently taking and those you may need in the near future. Then find a plan that covers your drugs and has reasonable copayments or coinsurance.
- Dental and Vision Insurance
In general, original Medicare doesn’t cover typical dental and/or vision, usually very expensive to retirees. Additional dental and vision insurance could help close the gap.
Dental and Vision Coverage Benefits:
Routine check-ups and cleanings covered
Helps defray the expenses of fillings, crowns, and other dental work
Eye exams and corrective lenses covered
Some plans extend discounts on procedures such as LASIK
When choosing dental and vision insurance, think about what you need now and in the near future. If you wear glasses or have dental problems, it may be smart to pay more for broader coverage.
- Long-Term Care Insurance
Long-term care is one of the biggest potential expenses retirees could face. Medicare only pays for a limited amount of long-term care, so long-term care insurance can become one of the more valuable options.
Understanding Long-Term Care Insurance:
It pays for services that may not be covered by health insurance. The services can include but are not limited to in-home care, assisted living, and even nursing home care. Policies vary depending on dollar amount per day and length of coverage. Premiums increase with age, so it is a product that typically should be bought sooner rather than later.
The coverage is expensive but can cover you against possibly catastrophic costs. Consider your family health history and financial situation when deciding whether to add this type of coverage.
- Hospital Indemnity Insurance
Even with Medicare, a stay in the hospital can be very expensive. Hospital indemnity insurance pays a cash benefit for each day you are hospitalized to help cover deductibles, copayments, and other expenses that your primary insurance doesn’t cover.
Key Features of Hospital Indemnity Insurance:
Pays per day for every day of hospitalization
Benefits are paid directly to you, not to the healthcare provider
May be used for any purpose; it is not restricted to medical expenses
- Others even provide coverage for outpatient surgeries or emergency room visits
This kind of insurance can be really handy, especially if one has a chronic condition that may involve frequent hospitalizations, or if one has a high-deductible health plan.
- Cancer Insurance
No one wants to consider a cancer diagnosis, but the sad truth is that it becomes more prevalent as we get older. Cancer insurance provides additional financial security in the instance of a diagnosis of cancer.
What Cancer Insurance Covers:
- Out-of-pocket medical expenses related to cancer treatment
- Non-medical expenses, such as transportation or child care
- Some policies offer a one-time benefit at diagnosis
- May include coverage for experimental treatments not covered by traditional insurance
Cancer insurance may provide peace of mind but, again, the policy wording must be read properly. Some policies have a waiting period, and some others exclude the coverage for a certain type of cancer.
- Critical Illness Insurance
Similar to cancer insurance, critical illness insurance covers you against the diagnosis of a severe illness within its scope and provides a lump-sum benefit. These illnesses can range from coronary heart attack to stroke to organ failure and others.
Merits of Critical Illness Insurance:
Cash benefit paid at the time of diagnosis of a covered condition Money can be used for anything you want, not just medical expenses Can be used to pay deductibles and copayments from your primary insurance Some policies offer wellness benefits to help with preventative care
It might mean a great deal if your family is afflicted with certain sicknesses, but make sure you know precisely what is covered beneath the policy.
- Accidental Death and Dismemberment Insurance
Although AD&D insurance is not health-related, it provides an immense amount of financial security for retirees and their loved ones. The policy compensates for accidental death or loss of a limb or specific bodily functions.
Key Features of AD&D Insurance:
- Pays a single sum in the case of accidental death
- Partial benefits in the case of specified injuries or loss of function
- Supplements life insurance
Often less costly than pure life insurance
AD&D insurance is an inexpensive way to increase your overall insurance coverage, but keep in mind it only pays for pure accidents and does not cover natural causes of death or disability, nor disability from illness.
- Travel Insurance
For many retirees, travel is the primary stay-at-home activity. The bad news is that Medicare has extremely limited coverage outside the United States. Travel insurance can offer vital protection when you are away from home.
What Travel Insurance Covers
Medically-related emergency care and evacuation
Cancellation or interruption of a trip
Baggage that is either lost or delayed. Pre-existing conditions may be covered under certain policies.
If you travel more than once per year or travel for extended periods of time, you may want to purchase an annual travel insurance policy instead of buying it for each trip individually.
How to Choose the Right Supplemental Insurance
There are so many options out there; it’s difficult to choose the right supplemental insurance. Here are a few tips to make the best decision:
- Assess Your Needs: Consider your current health, family medical history, and your lifestyle. Where are the biggest financial exposures?
- Know Your Current Coverage Inside and Out: Know what your current insurance-including Medicare-covers and doesn’t.
- Compare Policies: Compare the benefits, exclusions, and costs of several policies. Don’t just look at the premium; consider the deductibles and out-of-pocket maximums, too.
- Company Ratings: Stick to insurance companies rated highly for their financials. This will put them in a better position to pay claims.
- Fine Prints: Watch out for the waiting period, pre-existing condition clauses, and renewal terms.
- Consider Bundling: You get to enjoy a discount from some insurance companies if you purchase more than one policy from them.
- Reassess Regularly: Your needs may change over time, so you must reassess your coverage yearly.
Conclusion
Supplemental insurance can be so important in safeguarding your financial health during those later years of retirement. Though daunting at first, the options available will repay careful study and choice with no little peace of mind.
Supplemental insurance is not one size fits all. Individual health, income/financial position, and appetite for risk are where needs will vary. It is best to consult a licensed insurance agent or financial advisor who can navigate and help in choosing the right coverage.
By carefully considering your supplemental insurance options and choosing policies that align with your needs and budget, you can help ensure your retirement years are as financially secure and worry-free as possible. After all, your golden years should be a time to relax, enjoy life, and focus on the things in life that mean the most to you-not stress about potential health care costs or financial setbacks.
Take the time to consider your options, ask questions, and make an informed decision. Your future self will appreciate the added protection and peace of mind a well-chosen supplemental insurance will bring.
