There are some things we have come to appreciate that we need to be insured against - we cover our homes against fire and floods, or holidays against cancellation, and our lives against dying early while we still have financial obligations to meet. However, one expert is arguing we need to consider another type of insurance: against living too long.
Life expectancy has increased dramatically in recent years, and one area that has seen huge leap forwards is how long older people are expected to live. Back in the year 2000, a man who turned 65 that year could expect to live less than 16 years in retirement - now that figure has risen to 19 - so he'll make it to an average of 84. Women can expect to live even longer, and in 2016, the average 65 year old can expect to live to 86.
While we can all look forward to living longer, we also need to be aware that this means we will spend longer in retirement.
Barry Cudmore, Chief Executive of Aegon Ireland, explains: "When the concept of the old age pension was first introduced after the Second World War, the average retirement lasted just two years, but the retirement landscape has undoubtedly changed. Due to improvements in healthcare and living standards a 65 year-old retiring today has a one in three chance of living to 95. Retirees face the prospect of spending at least 20 or 30 years living on a combination of the money or assets they have set aside for retirement and the state."
Do you need insurance?
Cudmore suggests this means we consider the 'safety net' of converting at least some of the pension pot into a guaranteed income. He says: "Previous research has shown that the majority of people in the UK want some sort of guaranteed income in retirement to mitigate the risk of outliving their savings. Just like buying travel insurance is a key part of booking a holiday, looking at options to insure your retirement income should be a key part of later life planning."
"Since the introduction of the pension freedoms, pension providers have been able to offer products which provide flexibility, but also offer the security of guaranteeing a regular income for the rest of your life without the restraints of an annuity. In contrast to many of the insurance policies we purchase through our life, there is certainty that some form of guaranteed income in retirement will be used, and give retirees that all important safety net instead of the prospect of crash landing if the money runs dry."
But what do you think? Will you be insuring your retirement income? Or would you rather take the risk? Let us know in the comments.