What is it?
While modern medicine has significantly increased our average lifespan, our “healthspan"—the years we live in good physical and mental health—does not always keep pace. It is increasingly common to live for an extended period with a chronic illness or age-related decline. Unfortunately, the high cost of specialized care during these years can put an enormous, unexpected strain on your hard-earned retirement savings.
The primary uses for a long-term care benefit are funding residency at a specialized facility or hiring private, in-home caregivers so you can safely remain in your own house. Because these services require dedicated professional attention, the out-of-pocket costs can easily range into the tens of thousands of dollars per year. A common misconception is that the Canadian public healthcare system will cover these expenses in their entirety. Unfortunately, while provincial programs in Manitoba provide a baseline of support, waitlists can be long, and auxiliary public programs often only cover a fraction of the actual cost. The reality is that the heavy financial burden usually falls directly on the dependent individual or their family. Without a dedicated long-term care insurance strategy in place, many Winnipeg families find themselves unable to comfortably afford the quality of care they truly want or need.
How does it work?
Securing the protection of long-term care insurance starts with a clear understanding of your retirement goals. We do the heavy lifting by navigating the market to match your unique needs with the best available products. Together, we will design a tailored strategy by defining four key variables:
Type of Coverage
There are two types of long-term care insurance:
- coverage that will activate regardless of your age
- coverage that will only activate after age 65 or after 5 years if you purchase the insurance after age 60.
Other than the age of eligibility, the primary difference between these types of coverage is the cost. If you have ample retirement savings but are still concerned about the cost of long-term care insurance, coverage which activates after age 65 may be optimal. Conversely, if you are worried about the financial effects that being unable to perform certain daily activities would have on yourself and your family regardless of age, then, a policy which would activate prior to age 65 may be worth considering. It is important to note that not only seniors become unable to care for themselves. People of all ages are susceptible to experiences which would leave them unable to care for themselves.
Amount of Benefit
Before deciding on a dollar value to assign to your long-term care insurance plan, it is wise to first identify the type of benefit that best suits your needs.
The two types of benefits are income-style benefit and eligible-expenses style benefit. The former offers a pre-determined monthly amount which can be used for any expenses while the latter reimburses the insured for eligible expenses such as nursing, care-facilities, etc., up to a pre-determined maximum. Once this variable is defined, you then select the specific amount of that you require. Generally, benefit amounts range from $500/month to $10,000/month.
Length of Benefit
The length of the long-term care insurance benefit is the amount of time the insured will receive the benefit. Benefit periods range from 100 weeks to unlimited. The unlimited benefit period option is the most popular as the age at which one becomes dependant on long-term care and the duration of one’s dependence is unknown and can vary greatly. Naturally, the shorter benefit periods result in a lower cost while the higher benefit periods produce a higher cost.
Waiting Period
When applying for long-term care insurance in Winnipeg, you must define the length of time between when you become dependant and when you begin receiving the long-term care insurance benefit. You must remain dependant for the entirety of the waiting period to begin receiving benefits. Traditionally, there are two waiting periods to select from:
- 90-day waiting period
- 180-day waiting period.
Making this decision hinges on the amount of your retirement savings and the amount of premium you can afford. If you believe can sustain a 180-day waiting period by using your retirement savings and that this is preferable to a higher premium, then, the 180-day waiting period option may be optimal for you. If the opposite is true for your case, then, the 90-day option may better suit your needs.
After you have applied and been approved for coverage, you begin paying premium and may eventually make a claim. Commonly, in order to make a claim, you must no longer be able to perform 2 of the following 6 activities without substantial help. The activities are as follows:
Bathing
Dressing
Toileting
Transferring (from a bed to a chair, for example)
Maintaining continence
Eating
After filing and being approved for benefits, your long-term care insurance would begin paying as stipulated in the contract.
Who benefits from it?
In the forefront, the primary party benefiting from long-term care insurance is the insured individual receiving the benefit.
Long-term care facilities cost from $900 - $5000/month
Homecare averages $20-$90/hour.
An expense of this magnitude is detrimental to most retirement plans. Long-term care insurance provides a benefit of up to $10,000 per month.
This allows the insured to focus in their well-being as opposed to their finances.
Perhaps equally important, long-term care insurance unburdens an individual’s family. It is common for an individual’s immediate family members to bear the responsibility of funding the cost of their long-term care.
71% of working Canadians who financially support their elderly relatives report the cost harming their own financial stability.
By having long-term care insurance in place, you can protect not only your own financial stability, but that of your loved one’s as well.
Who can apply?
Generally, anyone above the age of 21 and below the age of 80 can apply for some form of long-term care insurance. The age at which you apply will greatly affect the premium you pay for your insurance. A 21-year-old individual will pay vastly less than an 80-year-old person for long-term care insurance as the younger person is far less likely to make a claim in the near-term.
