Medicare costsTips for managing health insurance costs during retirement
Medicare does not pay for a person’s final expenses, such as a funeral, after his or her death.
When mapping out your retirement plan, healthcare expenses can be one of the most important things to factor in. According to Fidelity Benefits Consulting, a 65-year-old couple retiring today may spend $280,000 on healthcare in retirement.1
While Medicare can help with some healthcare expenses, its benefits only extend so far. Funeral expenses, for example, aren't included in your coverage. Social Security offers a death benefit of $255, but the average funeral bill is much higher.2
Relying on retirement assets to fill the gap is one option to cover those costs. Purchasing a final expenses insurance policy offers another.
What is final expense insurance?
A final expense policy is a type of life insurance that's designed to eliminate any financial loose ends when you pass away. These policies feature a guaranteed death benefit that's payable to your beneficiary.
The proceeds of a final expense policy can be used to cover funeral, cremation or burial costs, as well as outstanding medical bills, credit card debt or any other end-of-life expenses.
Generally, final expense insurance is available to people aged 50 to 85, although some insurance companies may set the cutoff at age 80. Depending on the insurer you purchase the policy from, you may have the choice between term and permanent coverage, with benefit amounts typically ranging from $5,000 to $50,000.
Benefits of a final expense policy
There are several advantages to adding a final expense policy into your retirement plan. First, having this type of coverage can keep your spouse from having to tap into your retirement savings to pay for final expenses. That's important if you're concerned about your spouse having enough assets to maintain his or her lifestyle after you're gone.
Another benefit is the flexibility that these policies offer. For example, you can choose between a term or whole-life policy and choose a specific dollar amount that you'd like to designate for final expenses.
If you've made your funeral arrangements well in advance, you can purchase enough coverage so there are no surprises for your spouse.
Do you need final expense insurance?
Whether a final expense policy makes sense ultimately depends on the details of your financial situation. If you've saved enough to cover these costs, or you have an existing life insurance policy, then final expense insurance may not be necessary.
On the other hand, if there's a possibility that your retirement savings may fall short of your target number, this type of coverage could help reduce the financial burden for your spouse.
Look at all the angles in terms of how much you have saved for retirement. Figuring out how much you expect your final expenses to be and what benefits you can—and can't—expect from Social Security and Medicare is helpful for creating a more complete picture of your long-term financial needs and where a final expense policy fits in.
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