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Insurance for Seniors (65+)
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Insurance Guide for Seniors
Turning 65 opens new insurance options and brings important decisions. Medicare replaces employer coverage, life insurance needs change, and long-term care becomes a real consideration. This guide covers what changes and how to navigate your options.
At a Glance
- Medicare becomes your primary health coverage at 65—understand Parts A, B, C, and D
- Medigap or Medicare Advantage fills coverage gaps, but they work very differently
- Part D (prescription drugs) has late enrollment penalties—don’t skip it
- Long-term care is NOT covered by Medicare and costs are significant
- Life insurance needs often decrease—review whether you still need it
- Home and auto coverage should be reviewed for retiree discounts
Medicare Basics
Medicare is federal health insurance for people 65 and older. Understanding its parts is essential to avoid gaps and late enrollment penalties.
The Four Parts
| Part | What It Covers | Monthly Cost |
|---|---|---|
| Part A (Hospital) | Inpatient hospital, skilled nursing facility, hospice, home health | Usually $0 if you paid Medicare taxes 10+ years |
| Part B (Medical) | Doctor visits, outpatient care, preventive services, durable medical equipment | ~$174.70 (2024), higher if income exceeds $103,000 |
| Part C (Medicare Advantage) | Combines A + B through private insurers, often includes drugs and extras | Varies by plan—some as low as $0 |
| Part D (Prescription Drugs) | Prescription medications | Varies by plan, typically $15-100/month |
Critical Enrollment Deadlines
Initial Enrollment Period 7-month window around your 65th birthday: 3 months before, your birthday month, and 3 months after. Sign up during this period to avoid penalties.
Late Enrollment Penalties
- Part B: Premium increases 10% for each 12-month period you could have enrolled but didn’t—this penalty lasts for life
- Part D: Penalty of 1% of the national base premium for each month you delay—also permanent
Special Enrollment If you’re still working with employer coverage at 65, you may qualify for a Special Enrollment Period when that coverage ends.
Medigap vs. Medicare Advantage
After enrolling in Original Medicare (Parts A and B), you have two main paths for additional coverage.
Medigap (Medicare Supplement Insurance)
Medigap policies fill “gaps” in Original Medicare—deductibles, copays, and coinsurance.
How it works:
- Standardized plans labeled A through N (same benefits by letter, regardless of insurer)
- Works alongside Original Medicare
- See any doctor who accepts Medicare—no networks
- Need a separate Part D plan for prescriptions
- Higher monthly premiums, but more predictable costs
Best for:
- Those who want freedom to see any Medicare-accepting provider
- People who travel frequently (coverage works nationwide)
- Those who prefer predictable costs over lower premiums
Medicare Advantage (Part C)
Private insurance plans that replace Original Medicare.
How it works:
- Must still pay Part B premium
- Often includes Part D drug coverage
- May include dental, vision, hearing, fitness benefits
- Network-based (HMO, PPO)—may need referrals for specialists
- Lower premiums, but cost-sharing at time of service
Best for:
- Those comfortable with network-based care
- People who want all-in-one coverage
- Those who prioritize lower monthly premiums
Key Questions to Ask
- Do my current doctors accept this plan?
- Are my medications covered under the formulary?
- How much will I pay for a typical doctor visit? Hospital stay?
- What happens if I travel or need care outside the service area?
- Can I switch later if I’m not satisfied?
Prescription Drug Coverage (Part D)
Medicare Part D covers prescription medications. Most people should enroll when first eligible.
Why It Matters
- Penalty for late enrollment: 1% of the national base premium for each month you delay—permanent
- Exception: If you have creditable coverage (employer, VA, TRICARE) that’s as good as Part D
Choosing a Plan
- List your medications: Include dosages and quantities
- Use Medicare Plan Finder: Compare plans at Medicare.gov (opens in new tab)
- Check the formulary: Make sure your drugs are covered at reasonable tiers
- Consider mail-order: Often cheaper for maintenance medications
- Review annually: Formularies and costs change every year
Understanding the Coverage Gap
The “donut hole” occurs after you and your plan spend a certain amount on covered drugs. In 2024:
- Initial coverage until total drug costs reach $5,030
- Coverage gap until out-of-pocket reaches $8,000
- Catastrophic coverage after $8,000 (you pay just 5%)
Long-Term Care
Medicare does NOT cover long-term care—help with daily activities like bathing, dressing, eating, and toileting. This is one of the largest financial risks in retirement.
The Reality
- 70% of people over 65 will need some long-term care
- Nursing home: $8,000-12,000/month on average
- Assisted living: $4,500-6,000/month
- Home health aide: $25-35/hour
- Medicaid covers long-term care only after you’ve spent down most assets
Your Options
Long-Term Care Insurance
- Best purchased in your 50s or early 60s (premiums increase with age)
- Health issues can disqualify you
- Look for: inflation protection, benefit period of 3+ years, reputable insurer
- Premiums are not guaranteed—insurers can increase rates
Hybrid Policies (Life Insurance + LTC)
- Life insurance with long-term care rider
- If you never need LTC, heirs receive death benefit
- More expensive but eliminates “use it or lose it” concern
Self-Insuring
- Appropriate if you have substantial assets (typically $500,000+ beyond home equity)
- Requires honest assessment of spending down assets
- Consider a simple long-term care policy as “catastrophic” backup
Life Insurance Review
Life insurance replaces lost income for dependents. In retirement, your situation may have changed significantly.
When You May Still Need It
- Surviving spouse depends on your pension or Social Security
- You have outstanding debts you don’t want heirs to inherit
- You want to leave a specific inheritance
- Estate planning purposes (typically high-net-worth situations)
When to Consider Dropping It
- No one depends on your income
- You have sufficient assets for surviving spouse
- Premiums strain your fixed income
- Term policy is expiring and replacement is prohibitively expensive
What to Do with Existing Policies
Term Life If coverage is no longer needed, simply let the policy expire. There’s no cash value to recover.
Whole Life with Cash Value Options include:
- Keep it for the death benefit
- Surrender for cash value
- Use a 1035 exchange to an annuity
- Take a reduced paid-up policy (no more premiums, smaller death benefit)
Home Insurance Adjustments
Your home is likely your largest asset. Review coverage periodically.
What to Review
- Dwelling coverage: Rebuild costs change over time—is coverage still adequate?
- Personal property: If you’ve downsized possessions, you may be over-insured
- Liability coverage: Keep adequate limits—lawsuits don’t stop at retirement
Discounts to Request
- Retiree/over-55 discounts
- Security system discounts
- Bundling with auto insurance
- Claims-free discounts
- Paid-in-full discounts
Additional Considerations
- Flood insurance: Not covered by standard policies—assess your risk
- Umbrella policy: Extra liability protection if you have significant assets
- Home warranty: Can help with appliance repairs on a fixed budget
Auto Insurance Adjustments
Driving patterns change in retirement, which can affect your rates.
Potential Savings
- Low mileage discount: Reduced annual miles can significantly lower premiums
- Retiree discounts: Some insurers offer specific discounts
- Defensive driving course: AARP and others offer courses for senior discounts
- Remove commuter coverage: If you’re no longer driving to work
Coverage to Maintain
- Adequate liability limits: At least 100/300/100—your assets are at risk in a lawsuit
- Uninsured motorist coverage: Protects you from other drivers
- Medical payments coverage: Can help with costs Medicare may not cover immediately
When to Drop Collision/Comprehensive
If your car’s value is low (under $5,000), the cost of collision and comprehensive may exceed potential benefits. Consider your deductible and premium in this calculation.
Senior Insurance Checklist
- Medicare enrollment: Sign up during your Initial Enrollment Period
- Part D plan: Enroll to avoid permanent penalty
- Medigap or Advantage: Compare options based on your healthcare needs
- Long-term care: Assess options while still insurable
- Life insurance review: Determine if coverage is still necessary
- Home insurance: Verify dwelling coverage and ask about discounts
- Auto insurance: Report reduced mileage and request retiree discounts
- Beneficiaries: Update all policy beneficiaries
- Document organization: Keep insurance documents accessible for spouse/family
- Annual review: Medicare plans change yearly—compare during open enrollment
Not Sure What You Need?
Take our free 2-minute quiz to get personalized insurance recommendations for your retirement situation.
Next Steps
- Create a Medicare timeline—mark all enrollment deadlines on your calendar
- Compare plans annually—use Medicare.gov (opens in new tab) Plan Finder during October-December open enrollment
- Consult a SHIP counselor—free Medicare help through your State Health Insurance Assistance Program (opens in new tab)
- Review all policies—consolidate documents and update beneficiaries
Similar Situations
- Insurance for Pre-Retirement (50-64) - Planning before Medicare eligibility
Related Checklists
- Retiring Insurance Checklist - Medicare enrollment, coverage transitions, and retirement planning
Related Guides
Frequently Asked Questions
What's the difference between Medicare and Medicaid?
Medicare is federal health insurance for people 65+ (or with certain disabilities) regardless of income. Medicaid is a state/federal program for low-income individuals of any age. Some people qualify for both (dual eligible).
When should I sign up for Medicare?
Your Initial Enrollment Period is 7 months around your 65th birthday (3 months before, your birthday month, 3 months after). Late enrollment results in permanent premium penalties—10% per year late for Part B.
Does Medicare cover prescription drugs?
Original Medicare (Parts A and B) does not cover most prescription drugs. You need Medicare Part D or a Medicare Advantage plan with drug coverage. Failing to enroll in Part D when first eligible results in permanent penalties.
Should I choose Medigap or Medicare Advantage?
Medigap works with Original Medicare, letting you see any Medicare provider nationwide with predictable costs. Medicare Advantage is all-in-one coverage with networks and often lower premiums but cost-sharing at time of service.
What insurance do I need for long-term care?
Medicare doesn’t cover long-term custodial care. Options include long-term care insurance (best purchased in your 50s-60s), hybrid life/LTC policies, or self-insuring if you have substantial assets.
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