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What insurance should seniors buy? Detailed guide to prioritise the needs

As one gets older, insurance premiums naturally increase. No matter if you are a senior entering retirement who wants to reduce non-essential insurance expenses, or someone looking for insurance for your elder parents, this ultimate guide to senior insurance covers everything you want to know.
Author Bowtie Team
Date 2023-04-16
Updated on 2023-07-14
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What insurance do seniors aged 60 and above need?Accident insurance is also very important for seniorsCritical illness insurance is optional for seniorsLife insurance is also optional for seniors

What insurance do seniors aged 60 and above need?

Senior Insurance

For seniors, medical insurance is a must-have.

In Hong Kong, seniors have difficulty relying on the public healthcare system, and for those without income, receiving treatment at private hospitals can deplete a significant portion of their savings. However, should one sacrifice their health just to save money if there are better healthcare options available? Therefore, medical insurance after retirement is crucial.

Of course, purchasing medical insurance involves paying premiums, which increase with age and factors such as medical inflation. For instance, for a 66-year-old non-smoking woman, annual premiums can range from around HK$10,000 for a standard protection plan to over HK$30,000 to HK$40,000 for high-end medical insurance that provides full compensation. However, compared to private hospitals that charge over HK$100,000 or even hundreds of thousands of dollars, medical insurance premiums are at least calculable and can help control other retirement expenses.

Imagine knowing that you have to pay HK$20,000 in premiums each year; you would naturally adjust other expenses. But if you do not have medical insurance and suddenly require HK$200,000 in medical expenses due to an illness, it could disrupt your retirement budget. 

Of course, the best approach is to plan and save early while young, making retirement more comfortable. 

Is there any insurance specifically for seniors? 

The short answer is “yes”. 

There are protections on the market that specifically cover accidents, as well as cash compensation for certain illnesses (such as cognitive impairment). Unlike regular medical insurance/voluntary medical insurance, senior insurance policies provide lump-sum compensation instead of reimbursing actual medical expenses. In other words, if one suffers from illnesses like cataracts (which can be resolved through surgery), senior insurance policies may not provide coverage.

Accident insurance is also very important for seniors

As they age, the physical functions of seniors inevitably decline and they are more prone to accidents.

Many times, seniors may fall due to muscle weakness or loss of balance, which increases the risk of fractures. In severe cases, it may even affect their mobility and daily life.

In recent years, there have been accident insurance plans specifically designed for seniors. In addition to the coverage included in regular accident insurance (such as accidental death and medical expenses resulting from accidents), senior accident insurance also provides cash compensation for fractures and loss of daily life activities.

For example, under a senior accident insurance plan, if the insured person suffers a fracture due to an accident within 90 days, the insurance company will pay a lump-sum “fracture cash compensation” according to the compensation table. If the insured person permanently loses their ability to perform at least three of the following activities for six months or more within 180 days due to an accident, the insurance company will also pay an additional monthly cash allowance during the continuous disability period, up to a maximum of 60 months.

Loss of daily life activities means the inability to perform at least three of the following activities independently: mobility, dressing, eating, toileting, and controlling bladder and bowel movements.

Critical illness insurance is optional for seniors

Critical illness insurance can provide a lump-sum payment to the insured to support their living expenses during the treatment period, thus avoiding a heavy burden on their family. This is particularly important for those with work income or family responsibilities. Retirees do not have a monthly income and should be supported by their dependents. Even if they become ill, it may not bring too much burden to their family. Therefore, if a choice must be made, critical illness insurance is not necessarily essential.

However, it is worth noting that critical illness insurance provides a lump-sum payment with no restrictions on its use. If the budget allows, keeping critical illness insurance can also support medical expenses or provide emergency money.

If you have purchased a savings-type lifelong critical illness insurance (generally with a payment period of 15 to 20 years and provides lifelong coverage), and you purchased it around the age of 40, you will not need to pay premiums by the age of 66, so keeping it is not a problem.

If you still want to pay premiums but have difficulty affording them, should you surrender the policy? This depends on each individual’s situation and also considers the number of years of premium payments, as surrendering the policy may result in losing all or part of the cash value.

If you do not want to suffer financial losses due to surrendering the policy, term critical illness insurance is a good choice. Term critical illness insurance focuses on “pure protection” and has significant advantages in not only having lower premiums than lifelong critical illness insurance but also having greater flexibility. Even if the policyholder surrenders the policy early, they will not bear any financial losses, making it particularly suitable for those with unstable cash flows or who wish to use funds flexibly.

The elderly should make choices based on their actual financial situation and can also consult with professional and experienced financial planners.

Life insurance is also optional for seniors

In addition to critical illness insurance, many people also have life insurance. One of the purposes of taking out life insurance is to provide financial support for family members in the event of the policyholder’s unfortunate death. As mentioned earlier, retirees should be supported by their families, and their death may not have a long-term financial impact on their loved ones. Unless the elderly person considers issues of asset inheritance or property distribution, life insurance is not a necessity.

However, if someone purchased a life insurance policy with savings components before retirement and still needs to continue paying premiums after retirement, how should they handle it? Some older savings life insurance policies require lifelong premium payments, and although the monthly premiums may only be a few hundred dollars, every little bit adds up. Some policies allow premiums to be paid by deducting the cash value of the policy, which may seem like no premium payment is required, but it is actually equivalent to withdrawing money from the policy every month or year and then paying the premium.

Should one continue to pay premiums or cancel the policy? It is difficult to make a blanket statement, but at least several factors should be considered:

1. Cash Flow

Will continuing to pay premiums affect post-retirement life? If monthly expenses are already tight, the first priority is of course to handle daily living expenses.

2. Policy returns

It involves the guaranteed and non-guaranteed components, plus how to withdraw funds after surrendering the policy.

If the surrendered funds are simply kept in a bank, in today’s low-interest environment, there is basically not much interest earned. A policy can provide a stable return, so continuing to keep the policy in force may be a good option.

However, if the policy’s past returns have not been ideal, it is also possible to consider looking for other tools in the market, such as government-issued Silver Bonds/iBonds, which guarantee a dividend of 2-3.5 cents (depending on when they mature) and returns are linked to inflation. However, the issuance of Silver Bonds is limited, so it may not be possible to purchase a large amount. Additionally, public annuities that provide stable income, or immediate annuities, are also good options.

3. Underwriting

Before canceling the policy, you might want to make sure you don’t need it anymore in the future given that you may face more challenges in underwriting at older ages.

Is it possible to buy medical insurance after retirement? What should children pay attention to when buying insurance for their parents? Will insurance companies accept those with chronic illnesses?

In the past, the maximum age for purchasing medical insurance was 75 years old, while voluntary medical insurance has raised the maximum age to 80. However, this only means that the insured can submit an application to the insurance company before the age of 80, but it does not guarantee that the application will be approved. Insurance companies will assess the health status of the insured and decide whether to approve the application, add additional exclusions or increase premiums, and the worst-case scenario is to reject the application.

The older a person gets, the more their health deteriorates, and the higher the chance of being excluded or rejected from insurance coverage. 

Therefore, if you want to enjoy medical insurance coverage after retirement, it is best to buy insurance early while you are young and healthy. Children should also pay attention to their parents’ health conditions when purchasing insurance for them.

If you want to insure your parents, you should act as soon as possible!
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