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Reassessing Deductibles after Retirement

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An insurance review is an important annual task that helps keep your finances in order. During your working life, the changes you make to your policies will vary based on your income, debt, property and assets. When you retire, however, you have to be even more careful to consider the amount of savings you have, especially when it comes to determining your insurance deductibles.

 

How Deductibles Work

 

Your deductible is the amount you must pay out of pocket for an insurable incident before your insurance company pays a dime. For some policies, such as a health insurance policy, the deductible may be an annual amount that, once met, is no longer in play for future incidents. For other policies, such as your auto insurance policy, the deductible may be per-incident, meaning that it must be paid every time you have an insurable incident.

 

Evaluating Deductibles in Retirement

 

When you’re working, you know that you consistently have an income that will help you replenish any savings you deplete as a result of emergencies, repairs and deductibles. But once you’ve retired, there’s no way for you to reliably replace the savings you spend. If your deductibles are too high, you could find your savings quickly wiped out after a few years of bad luck, big storms and medical treatments.

 

Deductibles versus Premiums

 

Many people choose to have higher deductibles in order to save money on premiums. And while there is value to having a lower premium, it’s important to remember that premiums can be budgeted far easier than deductibles. With a deductible, especially a per-incident deductible, you simply don’t know what you could be facing, whereas a premium is static and predictable.

 

There are also other ways you can reduce premiums, including by bundling policies, paying premiums annually rather than monthly, and researching various discounts you might qualify for based on your history and lifestyle.

 

After retirement, every penny counts even more than it did before. Making the smart decision isn’t always just about saving money on monthly budget items, but also reducing emergency and unexpected expenses that can really cut into savings and hurt your income.

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