While it's always important to have sufficient insurance coverage, your needs in retirement will be different than they were at earlier stages in your life. That's why you should take the time ahead of that transition to review your coverage and assess your needs. Then, you can be sure of having the policies you do need in place to protect you, but can quit paying premiums for coverage you don't.

Health insurance

Folks who have worked for a total of at least 10 years become eligible for Medicare three months before they turn 65, whether they're retired or not. "Original Medicare" refers to the two primary parts of the program: Part A (hospital coverage) and Part B (physician and medical coverage). You will be automatically enrolled if you're receiving Social Security benefits on that date; if not, you will actively have to sign up.

Life insurance policy with crystal ball.


Weigh your timing carefully when you enroll in Medicare. Even if you're working at 65 and able to receive health insurance through an employer, it may be to your advantage to switch to Medicare during the initial enrollment period (IEP).

The simple reason is that you will save on premium costs. The IEP is a window that starts three months before you turn 65 and extends through your birthday month and the following three months. Turn 65 in July? You can enroll starting in April and as late as October of that year.

Penalties for being late with Medicare

If you don't enroll during the IEP, you'll have to pay a late enrollment penalty. Your Part B premium costs will rise 10% for each full 12-month period in which you were eligible to enroll in it, but didn't. (Most people don't pay a premium for Part A.)

In other words, if you become eligible for Medicare at 65 but work until 68 and choose to use your company's health insurance instead, you'll pay 30% more for Part B premiums.

It's not just a one-time penalty, either, but a differential you will pay for that coverage for as long as you keep it, which is likely to be the rest of your life. The premiums are relatively affordable, but why pay extra if you don't have to?

You're also entitled to enroll in a Medicare prescription drug plan, known as Part D. If you don't do this during the IEP, you'll be charged a penalty of 1% of the "national base beneficiary premium" multiplied by the number of full months you didn't have Part D or other creditable prescription drug insurance. This penalty, too, extends through the life of your Part D coverage.

Medigap coverage acceptance

Contrary to widespread belief, original Medicare doesn't make your healthcare entirely free. As discussed above, there are premiums for Part B, and both Part A and Part B have deductibles and copays. Those costs can add up formidably, so to manage them, you can enroll in one of the Medicare Supplement Insurance plans, known as Medigap. These plans are provided by private insurers such as Aetna or Blue Cross/Blue Shield, but regulated by the federal government, and are structured to cover what Medicare doesn't.

Adding further to the case for signing up for Medicare during the IEP,  there can be consequences and higher premiums if you don't enroll in a Medigap plan soon after turning 65.

During the first six months after you turn 65 and enroll in Medicare Part B, Medigap insurers cannot turn you down, for health issues or any other concern. But after that window closes, they can. They can also require a physical exam before they provide you with coverage, and potentially charge you higher premiums.

During your IEP, you can also choose a Medicare Advantage Plan, or Part C, rather than original Medicare and Medigap. Medicare Advantage Plans have been growing in popularity because many offer low premiums and enhanced coverage, such as vision and dental coverage. Just be sure that the Medicare Advantage plan you're considering will fulfill your healthcare needs. While you can switch to original Medicare later, you will not be able to enroll in a Medigap plan at the same time without potentially undergoing a physical and paying higher premiums -- and you could be turned down.

Long-term care insurance

Medicare will pay for many healthcare costs, but it doesn't cover all long-term care. It will, for example, cover nursing home care only for the first 100 days and if a physician signs off on the need for skilled nursing care. It won't pay for long-term custodial care if that's the only care a patient needs. Custodial care refers to help with the activities of daily life, such as bathing or dressing.

This can be both a health and an economic problem, because long-term care can be expensive. For a number of reasons, it pays to be proactive here, and consider whether you want long-term care insurance well before you retire.

If you sign up for such coverage while in your early to mid-50s, your premiums are likely to be significantly lower than someone who signs up in their 60s. Naturally, your health matters, too. People in poorer health will pay more in premiums, and if your health is already very poor, insurance companies may not be willing to sell you a policy at all.

Life insurance

If you have dependents such as a spouse or children who rely on you financially, you may have a term life insurance policy that's intended to replace at least part of your income if you die.

But life insurance is a prime candidate for reassessment as you grow older. If your children are grown and no longer depend on your income, you may not need a life insurance policy for them. Your spouse may receive spousal Social Security benefits, if you're eligible, and presumably will have the bulk of whatever retirement nest egg you have built together, so they may not need an insurance payout to either. For this reason, term life insurance policies can often be dropped later in life.

Vehicle insurance

Yes, most of the insurance types we've covered have been about your health or life. But don't neglect to reassess your vehicle insurance once you retire.

Insurance premiums are based on several factors, including your average mileage. If you've had a long commute to work, your premiums could drop when your time spent in the car does. It's worth a phone call to see if you're eligible for a better price.