Why the Need for Long-term Care Insurance
Long-term care insurance covers the insured in the event of prolonged physical illness, a disability, or a cognitive impairment like Alzheimer’s. This type of insurance is designed to help one live and maintain their lifestyle as it is now with their activities of daily living (ADL’s).
A person with a disability or illness will often need constant care and those who have cognitive impairments will need supervision. Long-term care insurance can help pay for these everyday expenses by using the insurance company’s money.
We represent major long-term care insurance companies and we pride ourselves in finding our clients the best policy at the best possible rate.
What You Can Do with the Benefit Payments
The need for long-term care plays out in stages – first for someone to come into your home to care for you, then transitioning your care to a long term facility when it is required.
Hire an experienced person to come into you home on a regular daily schedule so that you can stay at home but not be a burden to your spouse or family
Stay in your home until you decide that you would be better served in an extended care facility
You have control – when you can pay, you can choose the home you want in the neighborhood you want and do not have to wait months for a space
You do not have to wait until the social worker completes the study, decides your life:
Will you be allowed to stay in your home with care aids coming in to help or will you go in a home whenever one becomes available
Will the home be what you want, where you want, in the community you want – not very likely or will be wherever a bed comes up
You do not lose control of where you live and who shares your room
Long-term Care Insurance Basics
The following are the options for the company that we have found to offer the best value for most clients at this time. However, companies are coming out with new policies and existing policies are being changed so speak to one of our certified specialists if you are interested in getting quotes for this type of insurance. We can certainly provide you with some recommendations for your specific situation.
- Facility Care – Can be for 1, 2, 5 years, or lifetime
- Home Care – Can be for 1, 2, 5 years, or lifetime. It cannot be for a longer time period than the facility care component
- Return of Premium – Based on a specific criteria, the insured or their estate may be entitled to a return of premiums paid
- Inflation – Available on most policies but there is a considerable difference in its implementation from one insurance company to another.
90-day for both home care and facility care
Payments do not start until you have accumulated 90 days of home health care or care in a long term care facility. How this is calculated differs among companies.
60-day for home care and no waiting for facility care
Payments do not start until you have accumulated 60 days of home health care but start immediately on the admission to a long-term care facility of your choice.
Plans offer coverage for some many months or years, e.g. 2, 5 or 10 years, and most also offer lifetime benefits. While more expensive, the lifetime plan is generally the best solution. You would not want to experience being asked to leave you home for the last 5 years because you chose a plan with an abbreviated benefit payment duration to save a few dollars.
Long-term Care Insurance Features
In the event the insured is unable to care for themselves due to chronic illness or cognitive impairment, the insurance company pays a benefit to cover the cost of the medical services and support required to maintain day to day activities. It provides a tax-free daily benefit to cover the cost of care at home or in an extended care facility of choice. The benefit amount is sold in increments of per day, per week, or per month. The maximum daily benefit amount varies based on the type of product. Long-term care policies will pay benefits when the insured can no longer perform 2 or more activities of daily living (ADL’s) or is cognitively impaired.
Activities of daily living (ADL’s) include:
- Toileting – the ability to do all of the following, with or without the aid of equipment
- Get to and from the toilet
- Get on and off the toilet
- Maintain a reasonable level of personal hygiene for the body
- Dressing – the ability to:
- Put on or take off garments and/or braces or artificial limbs; and
- Secure and unfasten the garments or devices
- Eating – the ability to consume food that has already been prepared and make available, with or without the use of adaptive utensils. “Eating” does not mean an ability or inability to prepare the food
- Bathing – the ability to wash oneself completely in a tub, shower, or by sponge bath, with or without the aid of equipment
- Transferring – getting in and out of a chair (including a wheel chair) or bed. If a person can move with the help of equipment such as a cane, walker, crutches, grab bars or other support devices, then he or she will be considered able to transfer positions
Cognitive impairment means a loss of mental capacity demonstrated by a person’s inability to think, perceive, reason or remember. Such impairment results in a person’s inability to care for him or herself without ongoing supervision form another person and is not due to a mental condition without an organic cause. Determination of cognitive impairment will be made on the basis of clinical data and valid standardized measure of such impairments.
¹Definitions from Manulife Living Care Product which is a Long-term Care Insurance Policy when issued.
These Options May Not Be Sufficient When You Need It
In an era of government cutbacks, Canadians can no longer assume that provincial health plans will take care of all their needs if they develop a long-term illness or a serious disability due to high deficits, escalating health care costs and an aging population. Even if space is available in designated long-term care facilities, these are not necessarily the places you would want to spend months or years of your life-you go to the facility that you are assigned, in whatever city it is in, with whoever they say will be your room mate. It can take several years to get your parent into a government subsidized facility near where you live. Not a very desirable situation.
Even when you enter a “public” care facility, they will look into your wealth to determine the contribution you will be required to make. This can put substantial strain on limited resources for retirement. How will it affect your spouse’s standard of living? Consider a couple in their 80s, living on approx. $3,000 monthly, evenly divided from OAS, CPP, and GIS. If one of them goes into a subsidized government facility, approx. 80% of that spouse’s income is taken by the government to help pay the cost. The spouse remaining at home, has suddenly lost approx. $1,200 of the monthly income so now has only $1,800 to maintain the family home and lifestyle.
There is an income test to determine how much subsidy you will receive and this test is becoming more comprehensive. In some provinces, if you cannot afford the minimum personal contribution of $115/month, then it is set up as an amount owing to be collected whenever the family home is sold. In some provinces they do an audit that can go back five years to determine if assets have been distributed to children to avoid having to pay for long term care. These funds must be returned and used before the government will consider subsidizing.
- Depleting Retirement Savings
It can easily cost over $3,000/month for long term care including special services that are not in the monthly fee and this is inflating at about 5% per annum as the demand increases. How long would your savings and other assets last when the care could be required for many years?
- Using Home Equity Credits
In at least one Canadian province your home equity is at risk if you cannot afford the government minimum contribution. However, even a home equity loan or reverse mortgage would only cover a few years of care at best and what does that do to the spouses living standard and financial peace of mind.
- How many children can afford to add these payments to existing financial obligations?
- Will you take in your ill parent and be able to provide the level of care required and still maintain your health?
- Do you believe it will be difficult to continue working and look after an ill spouse or parent?
- What about taking family vacations, going out for an evening etc. when your parent can not be left alone?
- What of the stress on family members who are forced to travel for hours to visit on a regular basis? Consider the stress on the healthy spouse.
Should the Need Arise, You’ll be Glad You Got It
Long-term care insurance makes sense as an integral part of your financial planning. The costs cannot be planned for thus providing sufficient capital to cover these costs is impossible to predict. We have found that people, especially those with estate planning needs, can afford $100-$150/month to put this coverage in place.
Having this type of insurance takes the pressure off the decisions about spending money to maintain the quality of life for you or your aging parents. It will allow you to select a private care facility that meets your needs or to receive attention in the comfort of your own home if medical problems prevent you from performing certain basic activities of daily living. Equally important when the time comes to go into a long term care facility, the decision making is easier on the parent and the family when there is insurance in place as the decision to go into a home when required medically was made years before when the policy was purchased.
This type of insurance has been available in the United States for over 20 years. It has only been offered in Canada for the past several years. While it does not apply to everyone, it is something that is worth serious consideration in financial and estate planning. It can provide resources to maintain quality of life issues for those with modest estates and it can protect larger estates from the significant costs of extended health care for years in a quality home care facility.
Compare Long-term Care Insurance Quotes Online
The quickest and most reliable way to compare long-term care insurance plans is to get multiple quotes from an online rate comparison service like IDC Insurance. Not only will you be able to compare quotes from several top-rated companies, but you’ll be able to do so from the comfort of your own home. You’re free to do it at your own pace so you can take however much time you need to feel confident about your decision. Our accredited insurance agents will help guide you through this process and assist you to buy a policy for your or your loved ones when you’re ready.