Long Term Care Insurance

Posted 13 Nov 2014 by Melissa Allan

Have you thought about what your future will be like if you are not able to take care of yourself? It is not something we think about often but the reality is that, if we live long enough, some of us will end up in either a nursing home or retirement residence in our later years.

"More than (51%) of Canadians are afraid of becoming a burden on their family. And an overwhelming (90%) believe that preparing for their own long term care needs is the responsible thing to do." - Manulife Financial 2007 study.

I know, personally, there will come a time when my parents may require long term care. I hope our government is able to contribute to this need but at the same time I worry that, even if they do, will it be enough to maintain the lifestyle that my parents are used too? Will my brother and I have to dip into our retirement savings to help pay this cost? As a parent, I don’t want my children worrying about these things! Nor do my parents, so they are now working on their own long term care plan. (with the help of their favourite daughter of course!)

Why Long Term Care Can be Necessary

Many sources show that the leading reason to enter assisted living is Alzheimer’s. Most of these studies were completed in the United States where long term care insurance has been available for over 30 years. The average cost of nursing home care in Nova Scotia in 2010 was $94.75 a day including meals and accommodations. On the other hand, a private room in a retirement residence could cost anywhere between $1,705 and $4,300 monthly.

The government could help subsidise this cost if you meet the qualifications after a financial assessment. This test is based on your previous year’s tax return, and investment income from your portfolio is included in this calculation. If you are married and have dependents this is also taken into consideration and spouses are able to keep 50% of the joint family income and control of the family's assets.

Having said that, with so many baby boomers heading into retirement we wonder how much the government will be able to contribute when they need assisted living. With the Canadian population aging, there will be an even further strain on our health care system as well. Statistics Canada released a 2007 study indicating “for the first time in Canadian history, more than 4 million Canadians are over the age of 65, and the proportion of seniors is expected to double in the next quarter century”.

Did you know that, statistically, females have a higher long term care need? This is, in part, because we also have a longer life expectancy, but we tend to need long term care more often than males.

Long Term Care Insurance

Long term care insurance was introduced in Canada approximately 10 years ago. It has an approximate 30 year history in the United States so most of our claims information/carriers pricing is based on the US statistics.

This insurance is designed to provide income for either a registered facility or home care. Receipts are typically not required and when you qualify for benefits you can use your payment as you see fit. In order to qualify, most policies require that you cannot perform two of the six regular activities in daily living which are: eating, bathing, dressing, toileting, transferring, and maintaining continence. Cognitive impairments such as Alzheimer’s disease are normally included in most contracts as well.

Discuss your options

There are options to plan for this type of care whether through an insurance vehicle or an investment strategy. Either way, you should have a discussion with a loved one about this potential need and what your plan is. If you would like further information, please let me know. I would be more than happy to send you product or statistical material.