Long-Term Care Insurance
Jarrett McKay - Mar 13, 2017
Today’s retiring baby boomer generation and longer life expectancies have increased the demand for long-term care. While Canadians
Today’s retiring baby boomer generation and longer life expectancies have increased the demand for long-term care. While Canadians are very fortunate to live in a country with a publicly-funded health care system, many people may not be aware that many expenses related to long-term care are not covered.
Costs such as private nursing care, personal care, housekeeping support and even certain types of rehabilitation or therapy may not be covered or may only be partially subsidized through provincial coverage. In some cases, subsidized care is only provided to lower-income individuals.
When it comes to long-term care, many individuals will need to bear the associated costs. For the lucky minority, family and friends may take on the task of providing this care in the latter years. For those who will need to pay for these services, proper planning today can help to ensure things are well taken care of down the road.
Planning is the First Step
As a start, individuals should consider the type of lifestyle that is envisioned should long-term care be required. Long-term health care can be extremely expensive. The average cost for a private room in a retirement home in Canada can range from $900 to over $5,000 per month, or from $108,000 to over $600,000 over a 10-year period.* Private care in the home can cost even more, with increasing costs as additional services are required.
Once individual requirements have been mapped out, a plan can be created to fund these potential expenses.
Funding the Potential Costs
Insurance may be one way to help supplement the costs of long-term care. Even if enough funds have been set aside to cover future long-term care costs, insurance may be one way to preserve some capital for other uses. Often, the objective shouldn’t be to try to insure against the full costs of long-term care, but instead provide a financial safeguard in the event that long-term care will be needed.
LTC Insurance — What is It?
Long-term Care (LTC) insurance is a type of "living benefits insurance" that helps to support personal care on a long-term basis. This may be especially beneficial for individuals who contract a chronic illness or become cognitively impaired and are unable to perform tasks related to daily living. LTC insurance can help to cover services such as supervision and assistance with daily living activities received in a nursing home or at home. Generally, LTC insurance will reimburse, up to a specified limit, expenses incurred for certain defined types of care or pay out a pre-determined monthly benefit amount.
LTC insurance has received a lot of negative press recently as premiums tend to be quite high and have risen during this current period of lower interest rates. However, many insurance companies are beginning to respond by providing alternative products that may appeal to more cost-conscious individuals.
Consider the Options
Insurance may not be the only option considered to fund the potential costs associated with long-term care. Purchasing annuities may also be one way of providing a stream of guaranteed income that can help to cover the costs of long-term care. Recently, new hybrid insurance products have also been entering the market, such as life insurance policies that include long-term care riders which allow the individual to tap into the death benefit and use it to cover long-term care expenses before death.
We Can Help
There are many strategies that can be put in place to support your financial well-being in the latter years. Given our understanding of your financial situation, we can help to navigate the options and suggest solutions that are appropriate for your particular situation.
*Cost of private room in a retirement residence (no subsidy), Canadian Life & Health Insurance Association Inc. 2012 Report: "A Guide to Long-Term Care Insurance".
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