Long-Term Care Insurance

Like other types of insurance, long-term care insurance requires insured to pay a premium on a regular basis so that he/she does not have to pay a lump sum in the future in the event of a catastrophic illness or condition.

Long-Term Care Insurance benefits can start as early as the first day in the event that you lose the ability to take care of yourself. It provides a daily benefit to the insured while the dependency on long term care facilities or home care is required.

In addition, two generations can be protected; parents and children. It helps parents maintain their lifestyle and financial security by providing the resources needed to remain independent, even in the face of a serious health problem that may require one spouse to care for the other.

At the same time, it gives children an alternative to providing their parents with the care themselves.

The most common reasons that people need Long-Term Care Insurance are:

  • a prolonged illness, such as cancer;
  • a degenerative condition, such as Parkinson’s or a stroke;
  • a disability ;
  • a cognitive disorder, such as Alzheimer’s disease.

Although there are no guarantees in life, it is easy for one to take abilities for granted. Long-Term Care Insurance can help reduce the uncertainty about one’s ability to pay for care.

Statistically, as shown below, Long-Term Care is more common than one expects.

  • About 50,000 strokes occur in Canada each year. Stroke is the leading cause of transferring from hospital to long term care facility;
  • 1 in 11 Canadians over age 65 is affected by Alzheimer’s disease or related dementia;
  • 7% of Canadians age 65 and over reside in health care institutions;
  • An additional 28% of Canadians age 65 and over receive care due to a long term health problem, although they do not live in a health care institution.

Do I need critical illness insurance?

In determining your need for critical illness insurance, you should consider benefits that may already be available to you through other insurance policies, such as life insurance and group health insurance. Some companies provide additional coverage to group members and their dependents for disabilities, critical illnesses and accidental death and/or dismemberment. However, group plans are generalized and therefore might not meet individual needs. You should first consider what is currently covered in your insurance policies and what additional coverage you need to be fully protected.

As with other insurance policies, consideration of financial needs must be taken into account. If you have a mortgage, you have a spouse and dependents or any other financial obligations; you should consider critical illness coverage. In the unforeseen event that you develop a critical illness condition or disease, you want to rest assured that your family and you are protected. The loss of income from one spouse or the loss of a sole income flow can create a financial disaster for you and your loved ones. Public and private health insurance plans generally do not cover day-to-day living expenses.

How much does it cost?

Premium costs for critical illness insurance are dependent on many factors such as the insured’s age, pre-existing medical conditions and the amount of coverage including the number of illnesses covered by the policy. Each insurance company will also have their own rates for the various policy contracts. Typically, it is beneficial for the insured to purchase their critical illness insurance as young as possible. Generally, the younger the insured is, the healthier he/she is and therefore these premium costs will be lower and apply throughout the policy term. Consideration should be given to your current income, financial obligations and dependents as well as your health care needs when choosing which plan you require.
My claim was approved. When do I receive payment?

Each insurer has different requirements before the benefit will be paid out to the insured. Typically, policies mandate a 30 day waiting period after the claim is approved for the individual to receive their payment. However, some policies can have a shortened period of 14 days or no waiting period at all. This waiting period was designed to guarantee that the insured has suffered from one of the covered illnesses for a specific period of time without recovery or death. After said time, the lump sum payment will be given to the insured to use how he/she pleases. Once your claim is paid, your critical illness insurance policy ceases.

What if I never make a claim?

Some contracts provide an option which in the event that the insured dies within the specific waiting period or he/she dies from a reason not covered by the policy, the premiums paid will be given back to the beneficiary named in the contract policy. Again, specific to each policy, some plans will return a portion of the premiums or all of the premium payments back to the insured at the policy’s maturity so long as no claim has been made.

What if I make a full recovery?

So long as you have exceeding the waiting period specified in your policy without recovery or death, then you are entitled to collect the whole benefit amount even if you make a full recovery later.

Is long-term care insurance the same as critical illness insurance?

No. Long term care insurance covers an individual for future personal care needed to assist with daily activities that are unrelated to a specific medical condition when he/she is unable to complete these tasks on their own. This can include home health care (where a nurse comes to the house to assist in administering medicine or providing other daily activities) or help with costs related to nursing care facilities and retirement homes.

Long term care insurance is based upon either cognitive or physical inability to perform or impairments while critical illness is based on specific medical diseases or illnesses as outlined in the policy. Further, money received from critical illness insurance can be used as the insured wants while money received from long term care insurance must be used towards certain avenues. Long-term care policies generally reimburse the expenses incurred for various types of care covered in the policy or they pay a benefit amount on a daily or monthly basis. Critical illness insurance provides a lump sum payment that can be used however the insured sees fit.

Is disability insurance the same as critical illness insurance?

No. Disability insurance provides monthly payments to the insured in the event of a disabling feature which prevents the person from performing his/her normal workplace activities. Essentially, it is applicable to a person with a disability that cannot work or perform daily duties. Disability insurance is meant to act as an income replacement as a result. Typically, the benefit is limited to a percentage of one’s regular and therefore will not exceed the income level of the individual.

Critical illness insurance does not require the insured to provide an income statement, unlike disability insurance, which appeals to those who do not have fulltime employment, are self-employed or stay at home. Distinctively, critical illness is not based on the individual’s inability to perform work.

Seniors require assistance for various long-term health problems. These health problems range from chronic conditions such as arthritis, to cataracts or Alzheimer’s disease. Caregivers perform many tasks for seniors such as personal care, medical care (assistance with medical treatments or procedures), care management (scheduling or coordinating care giving tasks), transportation, as well as housekeeping.

There are many things to consider when determining your needs, including current income requirements, long term care costs in your area and other annual expenses. For instance;

  • Accommodation in a long term care facility can cost $800 to over $5,000 per month depending on the room type and level of government funding available in your province.
  • Private home care services range from $12 to $22 an hour for homemaking and personal care. Nursing care can be between $18 and $60 an hour.
  • More than one-third of Canadians age 45 – 64, who provided informal care to a family member or friend, incurred extra expenses as a result of their care giving duties.

If you have extended health or other benefits, you will need to understand exactly what they cover, and whether that coverage will end at age 65.

Long-Term Care Insurance can pay for long term care, either in an institution (such as a nursing home) or in a residence (such as an assisted living facility or even in one’s own home). Most people prefer an assisted living arrangement rather than living in a nursing home, so they can benefit by having insurance help pay for what they prefer.

One out of every two people will need long-term care at some point in their life time and over 70% of those over 65 will require long-term care.

Long-term care can be:

  • skilled nursing care, or
  • custodial care to help with daily living activities

Environmental settings for long-term care can be:

  • in a nursing home;
  • in an assisted living facility;
  • in your own home;
  • in an adult day care center.

Long-Term Care Insurance is for anyone who:

  • has assets to protect;
  • is not wealthy enough to pay for long-term care out of savings;
  • is healthy now .

Why plan ahead and purchase Long-Term Care Insurance early?

For as long as you pay your premiums, a policy is usually guaranteed renewable once you have the policy in place.

The premium is based on your age at the time of enrollment for insurance, and therefore a low premium is usually locked in for the life of your policy.

Features you should consider when applying for long-term-care insurance

Stability of the insurer

Look for reputable carriers that have provided Long-Term Care Insurance for a long time.

Settings for care

Seek out a policy with flexibility in the application of benefits (also referred to as an “alternate plan of care”). For example, you may want to choose from various nursing homes, assisted living, adult day care centers, or care at home.
A Facility-Only policy covers for care received in a licensed Assisted Living Facility or Skilled Nursing Facility, but not for care in an unlicensed facility or in your home.
A policy with Integrated Home Care at 100% covers for care received either in a licensed Assisted Living Facility or Skilled Nursing Facility, or in an unlicensed setting, such as your home.

Type of care

Read the policy carefully to find out which of the following is covered:

  • Skilled nursing care;
  • Custodial care;
  • Home health aides.

Benefit period

The average nursing home stay is 2 ½ years. One can insure for the average stay or insure for a longer stay if necessary. This can prevent financial burdens on one’s family if the insurance policy stops paying. It is recommended that one takes the longest benefit affordable.
Choose how many years the company will pay for care:

  • 2 years
  • 3 years
  • 4 years
  • 5 years
  • Unlimited number of years

Eligibility criteria

One becomes eligible for benefits from most long-term care policies when help is needed with two or more Activities of Daily Living (ADLs).
These ADLs are:

  • cooking
  • eating
  • bathing
  • dressing
  • using the toilet
  • maintaining continence
  • moving from place to place within the living environment

Price of the insurance

The price of Long-Term Care Insurance varies by your current age, the amount of coverage you want, the options you have selected, and the carrier.

Other options

Some insurance carriers experiment with options for those who purchase a long-term care policy when they are young; for example, the insured may be permitted to purchase an option to have premiums returned to the beneficiary if the policy owner never uses the policy.