Ask the experts: Planning retirement insurance costs

Get expert guidelines on budgeting for insurance

Here at Manulife, we’re lucky to have a wealth of experts on staff to help you purchase the insurance options that are most up your individual alley. There are few times in life that are more important to plan for financially, than retirement. And that financial planning includes the types of insurance that will be most beneficial during that time. Because we know retirement and insurance can be intimidating topics, we’ve enlisted a couple of our Manulife experts to help in your planning.

Our PlanRight team is dedicated to assessing customers’ needs and offering advice and solutions to meet those needs. Raj Seekumar is one of our valued PlanRight Advisors, so he knows what he’s talking about. We chatted with him about the types of insurance that are best for retirees.


First of all, why is it important to plan for your insurance needs in retirement?

Raj Seekumar: Most retirees have a fixed income coming from different retirement vehicles. It’s important to plan for insurance costs so that the retiree can add the fixed monthly cost to the budget.


What types of insurance should you consider for retirement and how do you decide how much you need?

RS: Deciding on the type of insurance and different options available within the insurance policy depends on the needs and wants of the retiree. That’s why it’s important for retirees to speak with a qualified advisor that will make appropriate recommendations.

How much you need, and the type of insurance, really comes down to budget. It’s important not to overspend on insurance. The premiums need to fit comfortably in their budget. (Editor’s note: features a helpful recommendation tool to help you decide which plan is right for your needs and budget.)

Health and dental insurance is a must if the retiree can afford the monthly premium. Health insurance covers expected medical expenses, but more importantly, unexpected medical expenses. Unexpected costs are not ideal for retirees if they’re not insured. Some retirees may have health and dental coverage options from their former employer. They should check. If they don’t, not to worry, there are plans that fit most budgets.

If a retiree has critical illness insurance already in force, they should look into the cost of extending the coverage period. All they need to do is contact their insurance advisor or call the insurance company directly.


Are there any hidden fees to look out for when it comes to getting insurance for retirement?

RS: None that I can think of. While this is not a hidden fee, and is pretty much standard, most health and dental plans cover a percentage of the claim. For example, if they cover 80%, the retiree would have to pay the remaining 20% out of pocket.

Thanks so much Raj!

Next, there are some tax implications that could actually work in your favour when it comes to health and dental insurance. So, we had a quick gab about that with our colleague Kam Lee, a knowledgeable Tax, Retirement & Estate Planning Consultant.


Can you explain the tax-related considerations to keep in mind when you purchase health insurance during retirement?

Kam Lee: Individual health insurance plan premiums may qualify for a non-refundable tax credit that can be applied against income for a tax year. The medical expenses must exceed a set threshold which is 3% of net income for the year. For example, the threshold for the 2020 tax year is $2,397. Next, the lowest tax rate (15% at the federal level, 5.05% for Ontario in 2020) is applied to the medical expenses above the threshold to determine the amount of the tax credit. In addition, a taxpayer can use their entire family’s medical expenses. Different conditions apply for Quebec residents.1

Retiring employees may be offered health coverage at a reduced cost with their former employer. The difference between fair market value and the reduced cost could be considered a taxable benefit for the retiring employees.

Those are some valuable guidelines. Thanks, Kam!

Another important insurance product to consider during retirement, especially once travel restrictions are lifted, is travel insurance, since exploring the world is a big feature of retirement for many. It’s important to be aware that if you rely on credit card travel insurance, sometimes there are age limits to the coverage. And you wouldn’t want to have a medical emergency in another country and find out too late that you aren’t covered. So, explore your travel insurance options. Some may even cover any pre-existing conditions you may have. Remember that if you plan to travel a few times a year, a multi-trip or annual plan can be much more cost-effective than purchasing multiple single-trip plans. You can check out your CoverMe® Travel Insurance.

With Raj and Kam’s guidelines in your back pocket, hopefully your retirement insurance planning just got a little bit easier! And while you’re planning, you can consider FollowMe™ Health and Dental Insurance, which offers guaranteed acceptance when you apply within 90 days of your work plan expiring, and CoverMe® Critical Illness Insurance.*


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

1 For individuals in Quebec, the 3% threshold will be based on net family income. The lowest tax rate of 16% is applied to the medical expenses above the threshold to determine the amount of the non-refundable tax credit. As well, Quebec residents may be eligible for a refundable tax credit for medical expenses if they meet certain conditions, including if their work income is $3,080 or more. The maximum credit is $1,205 and is reduced if the net family income exceeds $23,300 (amounts for 2019, indexed annually).

*FollowMe™ Health Plans are not intended to – and will not – provide the exact same coverage that you may have had under your group or existing health insurance plan. Guaranteed acceptance dependent upon receipt of the first premium payment and satisfaction of eligibility criteria.