Navigating Long-Term Care

Navigating Long-Term Care

 

As Canadians age, long-term care is becoming an increasingly pressing concern, especially for those nearing or in retirement. With rising healthcare costs and uncertainty around government subsidies, long-term care insurance (LTCI) is a financial tool that more individuals need to consider.

Financial experts agree that planning for long-term care is essential for protecting wealth, preserving retirement income and ensuring end-of-life care needs are met without placing undue stress on family members.

 

Blake Griffith CFP®, president of Griffith & Associates Estate & Financial Planning at Sun Life Financial, outlines the basic structure of LTCI and how it can help retirees and pre-retirees safeguard their finances. “Generally, there are two types of LTCI: those that reimburse you for approved expenses up to a pre-determined maximum, and those that provide you with a fixed-income style weekly benefit for you to use as you see fit.”

 

To qualify for benefits, most insurers require that an individual either has deteriorated mental ability or needs assistance with at least two activities of daily living (ADLs), such as bathing, eating, dressing, transferring, toileting or maintaining continence. Understanding these criteria is critical when considering LTCI, as eligibility hinges on individual health and care needs.

 

David Mason CLU, CFP®, CHS, CIM of Mason Advisory Inc. and Investia Financial Services Inc. emphasizes that only a few insurance carriers still offer LTCI in Canada. “Currently, Sun Life and RBC Insurance are the only two insurance carriers remaining who offer long-term care insurance in Canada. RBC’s LTCI is only available on a conversion basis from existing critical illness and disability insurance policies.” This limited availability underscores the importance of planning early.

 

Who Should Consider Long-Term Care Insurance?

 

“Long-term care insurance should be considered by anyone planning for or already in retirement,” says Griffith. LTCI is particularly valuable for those seeking to protect their wealth from the high costs associated with care. “It can help protect your wealth and legacy, as well as alleviate the emotional, physical and financial stress on your children and caregivers in the event you need care.”

 

Mason agrees, noting that LTCI is designed for individuals who lose their independence. “LTCI covers the costs of care when a person can no longer care for themselves. Naturally, this is more attractive as people get older and plan for their retirement. However, when it comes to insurance, the earlier, the better.”

 

Tricia Leadbeater, CFA, portfolio manager and investment advisor at Richardson Wealth, adds that LTCI should be part of a broader financial strategy. “LTCI should be considered in the context of a broader financial plan for your retirement,” she explains. For some, particularly those with significant savings, it may be more prudent to save and invest to cover potential care costs. “Some people may be able to fully fund their care costs through savings, but others need the safety net that LTCI provides, particularly when it comes to estate planning and reducing the burden on family members.”

 

Benefits of Long-Term Care Insurance

 

The benefits of LTCI extend beyond immediate financial protection. According to Griffith, LTCI prevents retirees from liquidating savings to cover care expenses. “LTCI ensures you have the financial resources to choose the level of care that is right for your circumstances.” This flexibility allows retirees to select care options based on their personal preferences rather than financial limitations, improving their quality of life during retirement.

 

Mason highlights the importance of LTCI in protecting couples’ retirement security. “LTCI helps protect your savings and assets should you require long-term care without needing to draw down your retirement savings or jeopardize your spouse’s retirement security.” Knowing that care costs will not deplete resources is a major reason many choose to purchase LTCI.

 

LTCI also provides peace of mind to family members. Without a plan in place, loved ones may feel compelled to provide care themselves or contribute financially to the cost of professional care. By having LTCI, these burdens are significantly reduced, leaving families more time to focus on emotional support.

 

How to Fund Long-Term Care Insurance

 

As with any insurance, incorporating LTCI into a broader financial plan is crucial. Griffith suggests working LTCI costs into one’s retirement budget, similar to auto insurance or mortgage payments. “Setting aside a portion of your savings or monthly retirement budget to go towards LTCI is a way to protect your retirement savings and legacy,” he advises.

 

Mason echoes this, recommending a holistic approach. “The cost of LTCI is best considered within a holistic retirement plan that compares both the insurance protection and the potential impact of a long-term care need, should you need to self-fund these expenses.”

 

Leadbeater notes that purchasing LTCI earlier in life can lower costs, although it may not always be a top priority for younger individuals. “Like all insurance, the costs are lower the earlier you start and before you have health issues,” she says. “But if you’re young, focusing on disability insurance or life insurance might be more important, especially if you’re the main income provider for a family.”

 

Regular consultations with a financial advisor can help determine the right timing for purchasing LTCI and ensure it fits within a personalized financial plan. “A financial advisor can help fill knowledge gaps and give you confidence that your retirement goals, including long-term care, can be met,” Leadbeater adds.

 

What Does Long-Term Care Insurance Cover?

 

The specifics of LTCI coverage depend on the policy. Griffith explains that policies generally provide either a weekly benefit or reimbursement for care-related expenses, such as in-home assistance or care in a senior’s home. “It is important to understand the details of your specific policy and how you receive reimbursements or income through your plan,” Griffith says.

 

Mason further explains that once a policyholder meets the criteria and waiting period, which is typically one or two years, they can use the funds as needed. “LTCI provides an income-style benefit if you become unable to care for yourself due to aging, an accident, illness or deteriorated mental abilities.”” This flexibility allows policyholders to select the care option that best suits their needs, whether in-home care, a retirement home or a long-term care facility.

While LTCI provides valuable financial assistance, it is not a catch-all solution. Many policies do not cover all types of care, so it is vital to carefully review coverage options and consult with a financial professional.

 

The Future of Long-Term Care in Canada

 

As the Canadian population ages, demand for long-term care is expected to rise significantly. “Health care advancements and increased lifespans mean many Canadians are spending more time receiving care and incurring significant costs,” says Griffith. This growing need is putting pressure on the healthcare system, and government support for long-term care may not continue at current levels.

 

Leadbeater echoes these concerns, noting the uncertainty of future government subsidies. “The government’s ability to subsidize long-term care may change, and individuals cannot rely solely on public programs for their long-term care needs.”

 

Given the increasing costs and uncertainties, planning for long-term care is more critical than ever. “Having a holistic financial plan and an advisor to identify risks and plan accordingly is key to achieving lifetime financial security,” says Griffith.

 

Mason also suggests that individuals may consider life insurance as an additional tool for covering care costs, as it can provide cash resources during one’s lifetime while also passing on value to an estate.

 

LTCI is one important part of a comprehensive retirement plan. By working with a financial advisor and regularly reviewing one’s options, individuals can ensure that both their retirement and care needs are met, securing peace of mind for themselves and their families. Whether through saving, investing or purchasing LTCI, having a plan in place before the need arises is essential.

 

Originally published in Business in Calgary Magazine By Erlynn Gococo