Long Term Care Insurance
Imagine this scenario: You are enjoying your retirement years, spending time with your family and friends, pursuing your hobbies and passions, and living life to the fullest. Then, one day, you have a stroke that leaves you paralyzed on one side of your body. You can no longer do the things you used to do by yourself. You need help with basic tasks such as bathing, dressing, eating, and moving around. You need constant care and supervision to ensure your safety and well-being.
Who will take care of you? How will you pay for the care you need? How will this affect your quality of life and your loved ones?
This is not a pleasant scenario to think about, but it is a possible reality for many Canadians. According to Statistics Canada, about 1.5 million Canadians aged 15 and over have a disability that limits their daily activities. Moreover, the risk of disability increases with age. About 43% of Canadians aged 75 and over have a disability that requires assistance with daily living activities.
If you become unable to care for yourself and need long-term care, you may face significant financial and emotional challenges. The cost of long-term care can be very high, depending on the type and level of care you need, the location and quality of the care facility, and the availability of government subsidies or programs. The average cost of a private room in a long-term care facility in Canada is about $2,500 per month, but it can range from $1,000 to $6,000 or more depending on the province or territory. The average cost of home care services in Canada is about $35 per hour, but it can vary depending on the type and frequency of services.
If you don’t have enough savings or income to pay for long-term care, you may have to rely on your family or friends to provide or pay for the care you need. This can put a lot of stress and burden on them, both financially and emotionally. They may have to sacrifice their own time, money, health, or career to take care of you. They may also have to deal with the guilt, frustration, or resentment that may arise from caregiving.
How can you avoid this scenario? How can you protect yourself and your loved ones from the financial and emotional impact of long-term care?
The answer is long-term care insurance.
Long-term care insurance is a type of insurance that pays you a daily or monthly benefit if you become unable to care for yourself and need long-term care. It can help you cover some or all of the costs of long-term care, whether it is provided at home or in a facility. It can also give you more choices and flexibility in the type and quality of care you receive.
Long-term care insurance is not just for seniors. You may become unable to care for yourself at any point in your life due to an illness, injury, or accident. Long-term care insurance can provide you with peace of mind and financial security in case of a disability.
Features of Long Term Care Insurance
Long term care insurance policies vary in terms of the benefits they offer, the premiums they charge, and the eligibility criteria they use. Some of the common features of long term care insurance are:
- Benefit amount: This is the amount of money you will receive from your policy per day, week, or month if you qualify for benefits. The benefit amount may be fixed or adjusted for inflation over time.
- Benefit period: This is the length of time you will receive benefits from your policy. The benefit period may be a specific number of years, such as two or five years, or unlimited.
- Waiting period: This is the amount of time you have to wait before you can start receiving benefits from your policy after you become eligible. The waiting period may be zero days, 30 days, 90 days, or longer.
- Eligibility criteria: This is the set of conditions you have to meet to qualify for benefits from your policy. The eligibility criteria may be based on your level of disability, your need for assistance with certain activities of daily living (such as bathing, dressing, eating, etc.), or your cognitive impairment (such as Alzheimer’s disease or dementia).
- Exclusions and limitations: These are the situations or conditions that are not covered by your policy or that may reduce your benefits. For example, some policies may not cover pre-existing conditions, mental disorders, substance abuse, or injuries caused by war or criminal acts.
Who Is Long Term Care Insurance For?
Long term care insurance is designed for people who want to protect themselves and their families from the financial burden of long term care costs. Long term care costs can be very high and may not be fully covered by government programs or other sources of income.
Long term care insurance may be suitable for you if:
- You are concerned about your future ability to pay for long term care services
- You want to have more choice and control over the type and quality of care you receive
- You want to preserve your assets and income for yourself and your heirs
- You are in good health and can pass the medical underwriting process
Long term care insurance may not be suitable for you if:
- You have a limited income and cannot afford the premiums
- You have a serious health condition that makes you ineligible for coverage or increases your premiums significantly
- You have access to other sources of funding for long term care, such as personal savings, family support, government programs, or other insurance products
Types of Long Term Care Insurance
There are different types of long term care insurance products available in Canada. Some of the main ones are:
- Traditional long term care insurance: This is a standalone policy that pays a benefit amount if you meet the eligibility criteria. You pay a premium for as long as you have the policy or until you start receiving benefits. The premium may increase over time depending on the policy terms and conditions.
- Hybrid long term care insurance: This is a policy that combines long term care insurance with another type of insurance, such as life insurance or annuity. You pay a single premium upfront or over a period of time and receive a benefit amount if you meet the eligibility criteria. If you do not use the long term care benefit, you or your beneficiaries may receive a death benefit or an annuity income instead.
- Linked benefit long term care insurance: This is a policy that links long term care insurance with another type of insurance, such as critical illness insurance or disability insurance. You pay a premium for both types of coverage and receive a benefit amount if you meet the eligibility criteria for either one. The benefit amount may be reduced by the amount paid from the other type of coverage.
How Does Long Term Care Insurance Work?
Long term care insurance works by providing you with a source of income if you become unable to care for yourself and need assistance to manage daily living activities. The process of applying for and receiving long term care insurance benefits typically involves the following steps:
- Choose a policy: You can compare different policies and providers to find the one that best suits your needs and budget. You can consult an insurance agent or broker to help you with this process.
- Apply for coverage: You have to fill out an application form and provide information about your health history and current condition. You may also have to undergo a medical exam or provide medical records. The insurer will review your application and decide whether to approve or decline your coverage or offer you a modified policy with different terms and conditions.
- Pay premiums: You have to pay premiums to keep your policy in force. The amount and frequency of your premiums depend on your policy type, benefit amount, benefit period, waiting period, eligibility criteria, and other factors. You may be able to pay your premiums monthly, quarterly, annually, or in a lump sum.
- Claim benefits: If you become unable to care for yourself and need assistance to manage daily living activities, you can file a claim with your insurer. You have to provide proof of your disability and your need for long term care services. You may also have to submit receipts or invoices for the services you receive. The insurer will assess your claim and determine whether you qualify for benefits and how much you are entitled to receive.
- Receive benefits: If your claim is approved, you will receive benefits from your policy according to your benefit amount, benefit period, waiting period, and other factors. You can use the benefits to pay for the long term care services of your choice, such as a care facility or home care services. You may have to pay taxes on the benefits you receive depending on your policy type and personal situation.
Long term care insurance is a type of insurance that can provide coverage if you become unable to care for yourself and need assistance to manage daily living activities. It can help you protect yourself and your family from the financial burden of long term care costs and give you more choice and control over the type and quality of care you receive. However, long term care insurance is not suitable for everyone and has some limitations and exclusions. Therefore, it is important to understand the features, benefits, costs, and risks of long term care insurance before buying a policy.