Long Term Care Insurance
Last time, we looked at Critical Illness insurance designed specifically to cover children and childhood illnesses. Today we’ll look at another not well known insurance, Long Term Care Insurance, LTC.
What is long term care insurance? It’s a type of insurance designed to address the health, social, and personal care needs of individuals who have lost the ability to care for themselves. There is a certain degree of public support available, but government programs are not comprehensive and long term care services can be very costly.
The level of health care and professional assistance we need, together with the associated costs, will increase with age. The average Canadian will experience 9 – 14 years of the final years of their life with diminished health, according to Statistics Canada, 2012.
Long term care insurance helps to pay for the care services that other plans don’t provide and bridge the gap between what is covered by provincial health care, and the services you may want to access. LTC insurance helps to cover the costs of care, meaning you have more choices around the kind of care and the amount of care you’ll receive. Your retirement savings and investments can be preserved. LTC will prevent you from dipping into your retirement income to cover your health care costs.
How does long term care insurance work? LTC provides an income-style, tax free, benefit when the insured person becomes unable to care for themselves due to aging, an accident, illness or deteriorated mental ability. It offers peace of mind knowing that the financial burden of care won’t rest entirely with your loved ones.
Who can be covered? People between the age of 21 and 80, who are approved through an underwriting process, which assesses your likelihood of becoming dependent on someone else for care.
How do you qualify for the benefit? If you are unable to perform 2 of the 6 activities of daily living which include, bathing, dressing, toileting, transferring, continence and feeding, or you need constant supervision by another person because of deteriorated mental ability, you would be eligible to receive your monthly benefit amount. There is a waiting period that needs to be met; the length of which is chosen by the insured at the time the insurance in put in place. Benefit periods can vary from 100 weeks to lifetime coverage. This is something that is determined at time of purchase along with the amount of coverage to put in place.
Optional enhancements. As with most insurance policies there are options that can be added to enhance your coverage. A few of these are:
- Inflation protection: while on claim, your benefit would increase annually
- Return of premium on death: A returnable amount would be paid back to your beneficiary or estate upon your death (only available for issue age to 65)
- First payment bonus: When a new claim is first paid, a bonus of 12 times your weekly amount is paid
- Waiver of premium: Once a claim is approved you no longer need to pay the premiums
Nearly 75% of Canadians say their personal finances would be impacted if they were to develop a chronic health condition and 50% of Canadians say they are worried about the cost of health care when they retire. Speak to your Certified Financial Planner about adding a Long Term Care Insurance policy to your plan, offering you peace of mind and protecting your savings.
This column is written by Michelle Weisheit CFP, IG Wealth Management and presents general information only and is not a solicitation to buy or sell any investments. Please contact your own advisor for specific advice about your situation.