Planning

A roadmap during a cost-intensive life phase, that addresses both the needs of the caregiver and the assets of the patient.

So, You Say You Feel Lucky?

So, You Say You Feel Lucky?

by CAMILLA CORNELL
Contributing Editor

So, you feel lucky and don’t think you’ll need a long-term care policy?

Certainly, while the LTC policy has become a standard feature in the U.S., it’s a tough sell in Canada.

“You’re 100 percent sure you’re going to die some day,” says Nathalie Tremblay, health products manager for Desjardins Insurance, “but you can’t be sure you’re going to need long-term care.”

What are the chances you’ll need long-term care?

By the year 2036, the Canadian Life and Health Insurance Association estimates that 25 percent of all Canadians will be over 65 and a million Canadians will suffer from dementia.

The survey also found 75 percent have no financial plan in place to pay for long-term care if needed.

“I think there’s a lot of magical thinking among Canadians,” says Tremblay. “We think the government is going to step in and pay for us.”

Think again, says Stephen Frank, CLHIA’s vice-president of policy development and health. Current government programs would cover only about half of the expected $1.2 trillion cost of long-term care.

“People in Canada need to understand that they are going to be responsible for a portion or in some cases, all of their long-term care costs and they need to start thinking about how they’re going to address that,” says Frank.

Currently, if you don’t qualify for a government subsidy, nursing homes across the country charge from $800 to $8,000 per month and home-care costs range from $15 to $85 per hour, depending on the province and the skill level of the provider.

Anyone who has looked after a loved one with dementia knows first-hand how the costs of care grow as the disease progresses. “When you see the challenges that this type of illness brings, you don’t want to put your own children in the same situation,” says Tremblay.

Here’s what you need to know about your insurance options:

Long-term care insurance

Long-term care insurance covers care either in a nursing home, or in your own home, to keep you safe and independent.

The bad news: “If you wait until you have symptoms, it’s too late to get insurance,” says Frank. “It’s like trying to buy home insurance when your house is on fire.”

As a rule of thumb, the earlier you get an LTC policy, the cheaper it is.

“LTC insurance is quite expensive if you wait until your late 50s to get it because the probability that you’re going to need to draw on your insurance goes up with each year,” says Frank. “It’s relatively cheap if you buy it in your 30s.”

Other factors that affect the cost of an LTC policy include your family medical history and your own health. Since plans have differing options and benefits, “you want to really understand your coverage, ” says Frank.

Critical illness insurance

Critical illness policies pay out a tax-free lump-sum benefit if you’re diagnosed with one of a number of specified illnesses. Many policies cover Alzheimer’s Disease and other forms of dementia.

There’s no requirement for how you spend the money. You can use the payout to seek top-notch treatments, or to hire caregivers “as long as your need for them is triggered by a prescribed illness,” says Frank.

The downside: If you develop an illness that is not named in the policy, you can’t collect. Like LTC insurance, critical illness policies become more expensive as you age, and you can’t get coverage once you’re already sick.

Hybrid policies

In October 2013, Desjardins Insurance launched LifeLTC Advance, a new product that combines permanent life insurance with long-term care insurance, for those who feel hesitant about their need for LTC alone.

Here’s how it works: If you purchase a $100,000 policy, it pays out that full amount in life insurance if you pass away. But if, before then, you need help taking care of yourself, the LTC component of the policy allows you to draw down 1 percent per month ($1,000) to pay your costs for up to 100 months (about eight years).

And your survivors still get a payout of at least $25,000 on your death, depending on how much has already been paid in benefits.

Product

Amount of coverage

Premium

LTC insurance

$1,000/month when you need care on a daily basis

  • 90-day waiting period
  • Unlimited benefit period
  • Permanent coverage

$40.57/month

$2,000/month when you need care on a daily basis

  • 90-day waiting period
  • Unlimited benefit period
  • Permanent coverage

$67.64/month

Critical Illness insurance

$100,000

  • on diagnosis of one of the 25 illnesses covered (Cancer, heart attack, stroke, Alzheimer’s, etc.)
  • Refund of premiums in case of death
  • Temporary coverage (premiums increase each 10 years)
  • Option to convert to a permanent coverage

$51.75/month

$100,000

  • On diagnosis of one of the 25 illnesses covered
  • Refund of premiums in case of death
  • Permanent coverage (premiums leveled for the entire life)

$120.42/month

Life insurance

$100,000

  • Permanent coverage (premiums leveled for the entire life)

$73,19/month

Life with LTC Advance

$100,000 in case of death with an amount equivalent to 1% when you need care on a daily basis

  • Starting at age 65, if you need care on a daily basis, you receive 1% of the insurance amount per month. (The life insurance amount is decreased from the amounts paid with the guarantee that a minimum of 25% of the initial insurance amount will be paid.)
  • Permanent coverage
  • Leveled premiums

$85.40/month

Chart comparing insurance products for a 40-year-old woman in good health, provided by Desjardins Insurance.

Hybrid is pretty new, but at least one other source offers it:  Blue Cross

You might have to hunt around for any others.

Ask these questions about LTC insurance before signing on the dotted line:

  • How does the plan pay out? Some reimburse for expenses, while others offer a set monthly benefit (so you don’t have to submit receipts, and can spend the benefit however you like).
  • What kind of wait period does the plan require before you can begin collecting benefits? Generally it’s 30 to 90 days.
  • Does the plan waive premium payments once you begin collecting benefits?
  • Can you share coverage with a spouse or partner, allowing either to collect if need be?
  • Are support services available? SunLife’s LifestageCare, for example, points caregivers to resources and services to ease the burden of care. Manulife has a plan available through CAA that offers assistance to caregivers in setting up a care plan. Check to see if your insurer offers similar supports.

For more info, read Long-Term Care Insurance in Canada, by Ken McNaughton, CFP, CLU, CH.F.C., on the website: senioryears.com/longtermcare.html

 

Camilla Cornell is a writer specializing in health, based in Toronto, Canada



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Camilla Cornell

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