Long Term Care


When we envision retirement, the outlook often includes spending time with our grandkids and friends, vacationing, and playing golf. It is fun, carefree and independent. This vision may be on target for the first few years, but as we age the reality becomes very different. Your health will begin to deteriorate and care may be needed. At the beginning, this care may be as simple as mowing the lawn and shopping for groceries- easily fulfilled by family members. However as time persists, assistance could be needed to do the simple tasks of daily life. While your spouse is alive, he/she may be that person providing the assistance; but if he/she predeceases you or is in similar health, outside resources will be required.

The cost of these resources, whether it is nursing care within your own home or a long term care establishment can be detrimental to your retirement savings. You could deplete the legacy you had earmarked for your heirs or you could run out of money all together.

Consider this:

  • By 2036, 25% of the Canadian population will be over age 65 and 1 million will have dementia
  • The chances of living to age 100 are better than ever – this also comes with a requirement of care for many years
  • Government health care programs may cover only a small part of the costs for a nursing home
  • 3/4 of Canadians admit to having no financial plan to pay for long term care if they need it
  • Over 1/2 of women and 1/3 of men over age 65 will reside in a nursing home at some point in their lifetime
  • Long Term Care accommodations can run from $900-$5000/m depending on the room type, level of care needed and the level of government funding available
  • It is predicted that the average North American will spend more time caring for elderly family members than raising their own kids
  • Care within your home can cost up to $30/hr for personal care and $70/hr for nursing care

The solution is long term care insurance.

 

What is Long Term Care Insurance?

Long Term Care insurance pays a monthly benefit if the insured requires assistance to perform 2 of the 6 activities of daily living or suffers an organic cognitive impairment which results in a need for constant supervision.

Benefits are received tax free.

Benefits are payable if care is received in the home or in a facility.

Benefits are payable for 1,2,5 years or lifetime depending on the benefit period chosen.

Care must be received in Canada or the United States in order to receive benefits.

Premiums:

Premiums are age- based meaning they are set based on the age when the policy is issued and remain level for the premium paying period, which is often lifetime. Some plans provide for a 20 year payment period, at which point the policy is considered paid for and no further premiums would be required. Premiums are not guaranteed but can only be changed on a class basis. A premium increase cannot be made based on a change of health. Most plans do allow for premiums to be guaranteed for the first 5 policy years.

Considerations:

Long Term Care insurance can be difficult to qualify for medically as the carriers do not issue policies with additional exclusions. There are insurance plans that can be easier to obtain if insurability is a concern.

Long Term Care Insurance Plans:

There are 4 different plans outlined based on insurability issues and need for coverage:

Standard Long Term Care Insurance

Simple Issue Long Term Care Insurance

Conversion of RBC Disability Plan to Long Term Care Insurance

Critical Illness Insurance with a Long Term Care Component


Additional Resources:

A Guide to Long Term Care Insurance

Understanding the Need for Long Term Care

Why to Consider Long Term Care Insurance

Paying for the Boomers: Long Term Care and Intergenerational Equity

Life After Retirement: Health Care Costs Require Careful Planning