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DON’T CONFUSE THREATS to your happiness with financial threats.
For instance, it would be devastating if one of your children died at a young age, and no doubt that’s why some folks buy life insurance on their children’s lives. But while the death of a child is a threat to your happiness, is it a threat to your finances? It’s terrible to say it, but just the opposite is true: You’d probably be better off financially. You’d no longer have the cost of raising the kid and putting him or her through college—and thus buying life insurance on a child’s life makes little sense.
Similarly, dying early in retirement would be an unhappy occurrence. But would it be a blow to your finances? Again, just the opposite is true. At that point, all your financial troubles would be over. The fact that you’d delayed claiming Social Security, took pension payments rather than a lump sum, or bought immediate fixed annuities wouldn’t matter to you—and yet folks often say that fear of an early death is the reason they claimed Social Security at age 62, took the lump sum pension payout and avoided immediate annuities.
To be sure, such steps would leave your heirs wealthier. But remember, even without such steps, your early death would likely give a notable boost to the net worth of your heirs. After all, you won’t have spent much of your retirement savings, plus your heirs will get access to that money, plus your home’s value, earlier than they might otherwise have expected.
That brings me to two more examples: extended warranties and trip cancellation insurance. Obviously, it would be upsetting if you dropped your iPhone or you had to cancel your next vacation. But while these might make for a bad day, they wouldn’t be a huge financial blow. In fact, if you had to cancel your next trip, you might lose most of the airfare, but you’d probably dodge the cost of hotels and meals out, so you’d be better off financially than if you had taken the trip.
“But while the death of a child is a threat to your happiness, is it a threat to your finances? It’s terrible to say it, but just the opposite is true: You’d probably be better off financially.” Geez – know you try to qualify this, but insensitive still. While I never insured my children, I imagine my wife and I would be in therapy for years at say $400/hr.
Couldn’t agree more. I have never understood the arguments about “breaking even” with Social Security. Much more important to get the largest possible check as a basis for future COLAs.
If you are taking a tour or cruise it is probably worth taking out insurance on that part of a trip – and early enough that pre-existing conditions are covered – but I have never bothered for other trips. However, I can’t stress strongly enough the need for medical and evacuation/repatriation insurance. Accidents can happen to anyone, heart attacks aren’t confined to the elderly, and a medically necessary or assisted return home from abroad can be exceedingly expensive.
I made sure my Medigap insurance plan had the international emergency care coverage too.
I agree breaking even with SS makes no sense, but most people can’t afford to delay benefits so it boils down to taking it when you need the income I think.
The coverage you get with Medigap plans is better than nothing, but all the ones I’ve seen have a $50,000 lifetime max and 20% copay. And no evacuation coverage.
I agree — but getting health insurance for an international trip, which I’ve started doing, is different from getting trip cancellation insurance. That said, if you’re taking, say, an expensive cruise and you’re age 80 or older, I could see getting trip cancellation insurance because of the risk that ill-health could prevent you from going. But I see that as a special case, and not a reason to regularly buy trip cancellation insurance.
You might want to consider including in the HD/Guide/Safety Net section an entry discussing medical and evacuation/repatriation insurance for travelers. I took a quick peek but didn’t see it there (although it could be mentioned in one of the existing entries). Just a thought.
Make sure that health insurance will get you home, and not just to the nearest “suitable facility” if something goes wrong. (I buy mine from Seven Corners.) I would buy regular travel insurance for an expensive cruise (not that I’ve ever take one) regardless of age. You don’t have to be over 80 to have an accident and you may also want coverage if you have ailing dependents. It’s actually difficult to find good medical coverage once you reach 80, or even 70 or 75 with some providers.
Kathy, it looks like Seven Corners only covers trips up to 60 days. Is that correct?
Typically evacuation coverage is per trip maximum of 60 days but the policy is for a year, covering multiple trips. Some carriers such as Medjet offer 90 day per trip limit, with annual or multi year coverage. Coverage is for both medical and political evacuation . She is making an important point- travel medical policies only get you to the nearest hospital , which may be totally inadequate for your accident or illness. The cost of medical evacuation back to the U.S. is very ,very high so consider evac coverage.
That’s basically what I’m seeing as well, unfortunately. Right now we’re on day 120-ish outside the US on our current “trip.”
We have an evac coverage that came with our airline loyalty program but will go away as we’ve lost our high status, so time to consider a replacement.
When I did a test RFQ it was good for up to 364 days.
Looked to me like 364 day policy duration, but for individual trips, apparently a choice of up to 30, 45 or 60 days.
That’s a pity. It used to be more.
Jonathan, thanks for an important, if somewhat touchy article. I’ve heard many versions of the “leaving money on the table” concern, with or without a spouse, or heirs. I recall a spirited SS claiming conversation with 3 old colleagues a few years back. It was interesting to see the differences in approach, based on marital status, health, and projected longevity.
About that early death thing, let’s hope if the heirs include a spouse, all their planning and decisions accounted for two life times, not just the retiree.
Social Security is an entitlement and our claiming choice can only be evaluated after death. My wife passed 6-30-23 after claiming her spousal benefit just 9 months ago. While math says she should have taken her benefit at 62. Together we made her choice with optimism and our long term horizon. Yes, she did break even but that has no meaning. Separating the plan from emotion is always important.
Indeed. With the last one to end having only one social security benefit and less favorable taxation.