Unless you are an insurance broker, you likely never heard of long-term care insurance. This is unfortunate as it provides a solution to a significant concern for most retirees – outliving your money.
RBC discontinued individual long-term care sales in 2012 (still available for conversion on their Disability and Critical Illness products). Manulife terminated individual long-term care sales on November 30th, 2017 and Desjardins Insurance will stop selling individual long-term care insurance on June 15th, 2018.
Once Desjardins exits the market, there will only be three insurance carriers that will offer long-term care insurance. Will they follow suit or increase costs? Time will tell. Here is a great article discussing that Manulife was in trouble with their long-term care insurance before they pulled the product off their shelves. To sum the article up, it states that claims were worse than planned – this means that more people used the product than anticipated. http://business.financialpost.com/investing/trading-desk/manulife-financial-corps-long-term-care-business-may-result-in-a-big-charge
Many Canadians believe that long-term care in a facility will be fully paid for by our government. The truth is that most Canadians are not correctly informed and do not realise that our public health care system does not cover long-term care. While some of the costs may be subsidized, a significant portion of the cost for long-term care will be paid out of pocket. Almost three-quarters of Canadians have admitted that they do not have a plan to fund long-term care if they ever needed it.
What is Long-Term Care Insurance?
Long-term care insurance will provide you with a tax-free monthly payment if you are not able to perform two or more of the following six activities of daily living – dressing, bathing, toileting, transferring, continence, eating). It would also pay out if you are suffering from a cognitive impairment such as Alzheimer’s disease and other types of permanent senile dementia.
Why Would I Want Long-Term Care Insurance?
What’s the single and greatest threat to depleting your assets in retirement?
- It’s not the markets, inflation or overspending.
- It’s your health.
Every year, the senior population is increasing. It’s expected that by 2036, 25% of the population will be seniors. Not only is the senior population increasing, but we are also living longer as well. This is putting pressure on our health care system, which can raise some questions:
- Who is going to be my caregiver?
- What should I expect from them?
- How much is health care going to cost me?
- Will the government subsidy decrease over time?
- Will I need additional home care over what the CCAC will offer?
- Will I always have money saved to fund this plan?
Given that there is a 2 out of 3 chance that one spouse will enter a facility at some point, you should ask yourself this question – Should I spend a bit of money today to have funds available if care is needed, or would I rather spend a pile of money down the road?
You should consider buying long term care insurance if:
- You want to protect your assets and income during retirement.
- You do not want to be a burden on your children or even your grandchildren.
- You want to stay independent of the support of others.
If you have assets that you are setting aside just in case care is needed, look at shifting some of these assets into a Long-Term Care Insurance policy. This way you can enjoy today knowing that you have the cost of care already covered.
What is Long-Term Care?
Long-term care is part of the province’s health care system and publicly funded on a cost-shared basis with residents. Residents who cannot afford the full cost of basic accommodation can apply for a rate reduction. The rate reduction is calculated based on income and is applicable only to basic accommodation. The current cost for long-term care accommodation is:
- Basic – $1,819.53 per month
- Semi-Private – $2,193.65
- Private – $2,599.11
While the above costs have been set by the Ministry of Health and Long-Term Care, you do have the option for private-pay care as well. Private-pay coverage could be either in a facility setting or the comfort of your own home. These services can run over $5,000 per month.
Why Didn’t I Know This Coverage Existed?
The challenge is, most advisors are not actively promoting or discussing this product with their clients. Is this because it’s a lousy product? No. Arguably, it’s one of the most critical insurance solutions for clients nearing retirement. Why are most advisors not talking about this product – the fact is that there are very few specialists like myself that understand living benefits (disability insurance, critical illness and long-term care insurance)? I don’t blame advisors for not selling something they don’t know given the lack of training on these products in this industry. With that said, I do also believe it’s their responsibility to learn these products or partner with someone who is an expert.
If advisors do not have the education on the product itself or do not realize the financial impact of needing care, how do we expect Canadians to know that such product exists or even understand the risk? Is it too much to ask that your advisor should be helping you understand all the products available to you in the market that they are licensed to sell?
It’s not uncommon for Canadians to explore their insurance options only once they know they need the coverage. Once they realize they need coverage, it’s typically too late to obtain the coverage. For long-term care, it could mean waiting until you are too old or after a newly diagnosed health concern. Now the cost of coverage may be too high, or coverage is no longer available. If you haven’t taken the time to understand the actual value of owning long-term care insurance and just hoping for the best – you may want to talk to an expert before it’s too late.
Here is an article that supports some of my opinions. https://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/why-long-term-care-insurance-is-slow-to-catch-on-with-canadians/article36664216/
How Much Does Long-Term Care Insurance Cost?
Cost of Long-Term Care Insurance*
| Age | Female | Male |
|---|---|---|
| 50 | $165.65 | $121.45 |
| 55 | $222.86 | $158.09 |
| 60 | $306.61 | $214.00 |
| 65 | $443.34 | $313.04 |
| 70 | $724.63 | $527.04 |
*Based on $3,000 of monthly coverage for a healthy, non-smoker. Coverage is customizable to fit your budget.
Let’s say a55-year-old female purchased $3,000 of coverage for $222.86 per month. At Age 80, she needed care. She would have paid $66,858 in premiums over a 25-year period. If she claimed for more than 22 months – she would have recovered all her costs. *Based on $3,000 of monthly coverage for a healthy, non-smoker. Coverage is customizable to fit your budget.
Want to Learn More?
If you wanted to learn more about long-term care insurance, feel free to give me a call, and I will be happy to discuss. There is no cost or obligation and you will never feel pressured to buy when dealing with SecurePlan. Our objective is to educate you on your options, so you can make an informed decision if this coverage is essential to you or not. Alternatively, here is an excellent guide produced by the Canadian Life and Health Insurance Association (CLHIA). http://clhia.uberflip.com/i/199446-a-guide-to-long-term-care-insurance/0?
By Jeff Romansky
CHS, CPCA Principal, SecurePlan Insurance Solutions
Jeff started his insurance career in 2006 when he joined RBC Insurance. During this time, he helped hundreds of insurance advisors grow their business by providing them with comprehensive advice, consultation and training. His commitment to building strong relationships, paired with his positive attitude and specialized expertise led him to win multiple awards including being #1 in his position throughout Canada on numerous occasions.
After nine successful years at RBC Insurance, he decided to pursue his dream and start his firm to help professionals, executives and owner-managed businesses with their individual insurance and employee benefits. Jeff proudly serves clients throughout Southwestern Ontario and the GTA.
Jeff Romansky is a broker, so you can be confident that he is working for you and not the insurance company. He consultative approach is welcomed by his clients as they never feel pressured and are always correctly informed. When necessary, Jeff will work with or bring in trusted partners to meet your overall financial goals. He is committed to building long-term relationships with all his clients and viewed as a trusted partner to many.
Jeff’ resides in Grimsby with his wife and daughter. When Jeff isn’t hard at work, you can find him with friends on the golf course, curling rink or camping with his family.