What insurance covers and why it matters at this stage of life

Insurance is a contract: you pay a regular amount, and the insurance company pays for certain costs if something happens — a car accident, a house fire, a hospital stay, or a death in your family. For older adults, the right insurance protects your savings, your home, and your family from costs that could otherwise wipe out years of careful planning.

The types of insurance that matter most shift as you age. In your working years, life insurance and car insurance are often the priority. After 65, Medicare becomes your main health coverage, but it does not cover everything — so supplemental insurance, prescription drug coverage, and long-term care insurance become relevant. If you own a home or a car, those policies still protect your assets. If you have grandchildren or other dependents who rely on you financially, life insurance may still make sense.

The goal is not to buy every policy available. The goal is to understand what each type covers, what it costs, and whether the gap it fills is real for your situation.

Key Takeaways

  • Medicare covers hospital and doctor visits but has gaps — supplemental insurance (Medigap) and prescription drug plans (Part D) fill some of those gaps, and you choose them during specific enrollment windows.
  • Homeowners insurance protects your house and belongings; auto insurance is required by law in every state and protects you if you cause an accident.
  • Long-term care insurance covers nursing homes, assisted living, and in-home care — costs vary widely by age and health when you buy, and many people find it too expensive or prefer to self-insure.
  • Life insurance makes sense if someone depends on your income or if you want to leave money to your family or a charity, but term life is usually cheaper than permanent policies.
  • AARP offers information on all these types and often negotiates group rates for members, but you compare plans and enroll directly with the insurance company.

Medicare and the supplemental coverage you may need

Medicare is federal health insurance for people 65 and older. It has four parts: Part A covers hospital stays, Part B covers doctor visits and outpatient care, Part D covers prescription drugs, and Part C (Medicare Advantage) is an alternative to A and B offered by private insurers. Everyone on Medicare pays Part B premiums (the amount varies by income), and most people also pay for Part D if they take regular medications.

Medicare does not cover everything. It has deductibles (the amount you pay before insurance kicks in), copays (a fixed amount per visit), and coinsurance (a percentage of the cost). It also does not cover dental, vision, hearing aids, or long-term nursing care. This is where Medigap (supplemental insurance) comes in. Medigap policies are sold by private insurers and fill the gaps in Original Medicare — they cover some or all of your deductibles, copays, and coinsurance. There are ten standardized Medigap plans (labeled A through N), and each covers a different combination of costs. You can enroll in Medigap during a specific window: when you turn 65 and sign up for Medicare Part B, or during the annual open enrollment period (October 15 to December 7).

If you choose Medicare Advantage (Part C) instead of Original Medicare, you do not need Medigap — Medicare Advantage plans include drug coverage and often include dental and vision. The trade-off is that you use the plan's network of doctors and hospitals, whereas Original Medicare lets you see any doctor who accepts Medicare.

Homeowners and auto insurance: what they cover and what they cost

Homeowners insurance protects your house, the structures on your property (a garage or shed), and your belongings inside. It also covers liability — if someone is injured on your property and sues you, homeowners insurance pays their medical bills and legal costs up to your policy limit. Most mortgage lenders require homeowners insurance as a condition of the loan. If you own your home outright, you are not legally required to carry it, but it is still a practical necessity: replacing a house after a fire or major storm costs hundreds of thousands of dollars.

The cost of homeowners insurance depends on your home's age, location, construction type, and claims history. A home in a flood zone or an area with frequent hurricanes costs more to insure. Older homes with outdated electrical or plumbing systems cost more. You can lower your premium by raising your deductible (the amount you pay out of pocket before insurance covers the rest), bundling homeowners and auto insurance with the same company, or installing security systems or storm shutters. AARP members can often access group rates through AARP's insurance partnerships.

Auto insurance is required by law in every state. It has two main parts: liability (which pays for damage or injury you cause to someone else) and collision/comprehensive (which pays for damage to your own car). The minimum liability coverage varies by state, but it is usually not enough to protect your assets if you cause a serious accident. Most financial advisors recommend carrying liability limits of at least $100,000 per person and $300,000 per accident. If you own your car outright and it is older, you may skip collision and comprehensive to save money. If you are financing or leasing, the lender requires you to carry them.

Long-term care insurance: what it covers and whether it makes sense

Long-term care insurance pays for nursing home care, assisted living facilities, adult day care, and in-home care (a nurse or aide coming to your house). Medicare does not cover these services, and they are expensive: a semi-private room in a nursing home costs an average of $100,000 to $150,000 per year, though costs vary significantly by region and facility type. Long-term care insurance can protect your savings and your family from these costs.

The catch is that long-term care insurance is expensive, and the cost depends heavily on your age and health when you buy it. A 55-year-old in good health might pay $1,500 to $3,000 per year for a policy; a 75-year-old pays much more, and insurers may deny coverage if you have a chronic condition. Policies also have waiting periods (you pay out of pocket for the first 30, 60, or 90 days before insurance kicks in) and daily benefit limits (the policy pays up to a certain amount per day). Many people find the premiums too high relative to the benefit, or they prefer to rely on Medicaid (which covers long-term care for people with limited assets) rather than buy insurance.

If you are considering long-term care insurance, talk to your doctor about your health outlook, and get quotes from at least three insurers. Some policies let you lock in a rate for life; others increase premiums over time. AARP offers information on long-term care insurance options and can connect you with insurers that offer group rates to members.

Life insurance: term, permanent, and when you actually need it

Life insurance pays a lump sum to your beneficiaries (the people you name) when you die. There are two main types: term life insurance, which covers you for a set number of years (10, 20, or 30 years) and is much cheaper, and permanent life insurance (whole life or universal life), which covers you for your entire life and is significantly more expensive but builds cash value over time.

Most financial advisors recommend term life for older adults, because it is affordable and the goal is usually to cover a specific need — paying off a mortgage, covering funeral costs, or leaving money to a grandchild or charity. Permanent life insurance makes sense if you have substantial assets and want to minimize estate taxes, but that is a specialized situation and worth discussing with an estate planning attorney.

You need life insurance if someone depends on your income or if you want to leave money behind. If you are retired and living on Social Security and savings, and your children are grown and independent, you may not need it at all. If you are still supporting a grandchild, or if your spouse relies on your income, or if you want to leave a gift to your church or a favorite charity, term life can be affordable and straightforward. Get quotes from at least three insurers — rates vary, and a 65-year-old in good health can often find a 20-year term policy for $30 to $60 per month.

How to compare insurance plans and enroll

Insurance companies publish detailed documents called Summary of Benefits and Coverage (for health insurance) or policy brochures (for other types). These documents spell out what is covered, what is not, what you pay, and what the limits are. Before you enroll in any policy, read the summary or brochure — it is dense, but it is the only place you will find the real details.

For Medicare and Medigap, you can compare plans on Medicare.gov. Enter your zip code, and the site shows you all available plans, their premiums, deductibles, and which doctors and pharmacies are in-network. You can enroll directly through Medicare.gov or by calling 1-800-MEDICARE. For auto and homeowners insurance, get quotes from at least three companies — rates vary widely for the same coverage. For long-term care and life insurance, work with an independent insurance broker who represents multiple insurers, or contact AARP to learn about group rates available to members.

Enrollment windows matter. For Medicare and Medigap, you have a limited window when you first turn 65 (your Initial Enrollment Period) and again each year (October 15 to December 7). If you miss these windows, you may pay a penalty for the rest of your life. For auto and homeowners insurance, you can enroll any time. For long-term care and life insurance, you explore and the insurer decides whether to cover you based on your health.

AARP resources and group insurance rates for members

AARP negotiates group rates with insurance companies on behalf of its members. These rates are often lower than what you would pay if you applied on your own, because the insurer knows it is getting a large group of customers. AARP offers information on Medicare Advantage plans, Medigap policies, prescription drug plans, long-term care insurance, life insurance, auto insurance, and homeowners insurance.

You do not enroll through AARP — you enroll directly with the insurance company. But AARP's website and materials help you understand your options, compare plans side by side, and see which insurers offer group rates to members. AARP also publishes guides on specific topics (like "Medicare and You" or "Long-Term Care Insurance") that walk through the details in plain language.

To explore AARP's insurance resources, visit aarp.org/insurance or call AARP at 1-888-687-2277. You do not have to be an AARP member to read the educational materials, but membership is required to access group rates.

Frequently Asked Questions

Do I have to buy Medigap insurance, or can I just use Original Medicare?

No, you do not have to buy Medigap. Original Medicare covers a lot, and many people use it without supplemental insurance. The trade-off is that you pay more out of pocket when you see a doctor or go to the hospital. Medigap fills those gaps, but it costs extra. The choice depends on your health, how often you see doctors, and your budget.

What happens if I miss the Medicare enrollment window?

If you miss your Initial Enrollment Period (the three months before and after you turn 65), you may have to wait until the next annual open enrollment period to sign up for Part B or Medigap. You may also pay a permanent penalty on your premiums for each year you were may be able to access but did not enroll. The penalty is small but lasts for life, so it is worth enrolling on time.

Can I drop my homeowners insurance if I own my home outright?

Legally, yes — if you own your home free and clear, no lender can require you to carry insurance. Practically, it is a bad idea. A house fire, theft, or major storm can cost hundreds of thousands of dollars to repair or replace. Homeowners insurance is relatively cheap compared to that risk, and it also covers liability if someone is injured on your property.

Is life insurance worth it if I am retired?

It depends on whether anyone depends on your income or whether you want to leave money behind. If you are living on Social Security and savings, and your children are independent, you may not need it. If you are supporting a grandchild, or if you want to leave a gift to your family or a charity, term life can be affordable and makes sense.

How do I know if long-term care insurance is right for me?

Talk to your doctor about your health outlook and family history. If you have significant assets you want to protect, and you are in good health, long-term care insurance may be worth the cost. If you have limited assets or chronic health conditions, Medicaid may be a better option — it covers long-term care for people with low income and assets. An elder law attorney can help you think through the options for your specific situation.