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Insuring your health

June 05, 2014

Five things to know about long-term care insurance

Chances are you’ve never considered the potential costs of long-term care. But as you get older, the odds of your needing that care will increase.

As time marches on, the onset of a chronic condition, degenerative illness or dementia could mean you or a member of your family will need constant care for an extended period, either at home or in a nursing home. And contrary to common belief, this care is not fully paid for by provincial governments.

In its 2012 consumer publication, A guide to long-term care insurance, The Canadian Life and Health Insurance Association (CLHIA) reported that depending on your province of residence:

  • Accommodation in long-term care facilities typically costs from $900 to more than $5,000 per month, based on the type of room and the level of government funding available.
  • Private home-care service can cost from $20 to $90 per hour for personal care or nursing care.

If you require extensive care, your costs could easily add up to between $35,000 and $65,000 a year. A 2013 CLHIA survey revealed that over half of respondents (52%) would not have sufficient funds to pay for long-term care if they needed it immediately. The 2013 Sun Life Canadian Health Index found that when faced with high health-care bills and no money specifically put aside to cover them, Canadians have been forced to drain their retirement savings, run up their credit cards or even mortgage their homes.

One way you can ensure you have the funds to help pay for care when you need it is to purchase long-term care (LTC) insurance. Here are five things about LTC insurance you need to know:

1. What coverage is available

Depending on the plan, you can purchase benefit amounts as high as $10,000 per month. Some plans require you to submit receipts up to a non-cumulative monthly maximum. Others offer an income-style benefit that will pay you a pre-determined amount each month to use for whatever you and your family may need.

2. What it covers

The proceeds from LTC insurance can pay for your care at home, at an adult day-care program, in an assisted-living or long-term care facility. These programs and facilities provide services such as nursing care, personal care or homemaking services.

3. What it costs

Your insurance premiums will depend on your age and health when you apply, so coverage is typically less expensive for younger applicants. The annual cost will also reflect the type and amount of coverage you choose, the length of time benefits will be paid and the waiting period you select. All LTC insurance policies have a waiting period of 30 to 180 days or longer from the time you first become dependent until you can start receiving benefits.

4. What “dependent” means

Typically, LTC insurance benefits are payable when you become dependent on another person for care. This means you need: constant supervision by another person because of your deteriorated mental abilities; substantial physical assistance with two activities of daily living (from a standard list of six); or stand-by assistance for bathing and transferring (e.g., moving from a chair or out of bed).

5. When benefits are payable

You can make a claim to receive your benefits when your coverage becomes effective. In many cases that’s immediately upon successful purchase. Other products are now available that provide coverage only after age 65. Once coverage is effective, your dependency will have to persist for the number of days in your selected waiting period before you start receiving your benefits. Some plans will pay your benefits for up to one year, while other plans may pay for two years, five years or even an unlimited period.

LTC insurance is part of a continuum of protection offered by life insurance companies that includes disability insurance, critical illness insurance (CII), personal health insurance and life insurance. In fact, some insurance providers allow you to convert CII to LTC insurance between the ages of 60 and 65 without having to answer questions about your health.

LTC insurance benefits can give you flexibility and control so you don’t have to borrow money, deplete your retirement savings or sell your house to pay for the care you need. Your financial advisor can provide more information to help you decide whether LTC insurance is right for you.

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