Published at 23 August 2021

5 things to know about long-term care insurance

Chances are you’ve never considered the potential costs of long-term care. But as you get older, the odds of your needing that care will increase.

You’re healthy now. But have you ever thought about what would happen if you had a chronic condition, degenerative illness or dementia? It could lead to a need for constant care, either at home or in a nursing home.

According to the 2019 Sun Life Barometer report, one in 10 Canadians have a parent in a long-term care facility or on a waitlist. (The Barometer survey measures Canadians’ attitudes about their health and finances.) What’s more, 71% of working Canadians who provide financial support to elderly relatives say it hurts their ability to save for retirement.

If paying for the care of a loved one means dipping into your own savings now, then ask yourself this: What will happen when you reach a point in your life where you need long-term care? 

Paying for long-term care is a growing concern – especially when you look at the overall expenses. And, contrary to common belief, your provincial health plan won’t fully pay for the cost of this care.

The Canadian Life and Health Insurance Association (CLHIA) reported that depending on your province of residence:

  • Accommodation in long-term care facilities typically costs from $900 to more than $5,000 per month. That’s based on the type of room and the level of government funding available.
  • Private home-care service can cost from $20 to $90 per hour for personal care or nursing care.

If you require extensive care, your costs could easily add up to between $35,000 and $65,000 a year.

So how can you ensure you have the funds to help pay for care when you need it? This is where long-term care (LTC) insurance plays a helping hand. But here’s what you need to know before you buy:

1. What types of long-term care plans are available

Depending on the plan, you can purchase benefit amounts as high as $10,000 per month. Some plans require you to submit receipts up to a non-cumulative monthly maximum. Others offer an income-style benefit that will pay you a set amount each month. You can then use this money for whatever you and your family may need.

2. What long-term care insurance covers

The money from long-term care insurance can pay for care at:

  • your home,
  • at an adult day-care program,
  • in an assisted-living or long-term care facility.

These programs and facilities provide services such as nursing care, personal care or homemaking services.

3. What long-term care insurance costs

Your insurance premiums will depend on your age and health when you apply. So coverage is typically less expensive for younger applicants. The annual cost will also reflect:

  • the type and amount of coverage you choose,
  • the length of time you will receive benefits and
  • the waiting period you select.

The waiting period is the length of time you must be continuously dependent before you can make a claim. Many long-term care insurance policies have a waiting period of 30 to 180 days or longer.

4. What “dependent” means in a long-term care plan

Typically, someone can receive long-term care insurance benefits when they become dependent on another person for care. This means they need:

  • constant supervision by another person because of deteriorated mental abilities;
  • substantial physical assistance with two activities (from a list of six) of daily living like getting dressed or eating; or
  • stand-by assistance for bathing and transferring (e.g., moving from a chair or out of bed).
5. When you can receive long-term care benefits

You can make a claim to receive benefits when your coverage becomes effective. In most cases, that’s immediately after you buy long-term care insurance. Other long-term care plans only provide coverage after age 65.

Once coverage is effective, you must remain dependent for the number of days in the selected waiting period before you start receiving benefits.

Some plans will pay benefits for up to one year. But other plans may pay for two years, five years or even an unlimited period.

Long-term care insurance is part of a variety of protection plans offered by life insurance companies. Other plans include disability insurancecritical illness insurance (CII), personal health insurance and life insurance. In fact, some insurance providers allow you to convert critical illness insurance to long-term care insurance between the ages of 60 and 65 without having to answer questions about your health.

Long-term care insurance benefits can give you flexibility and control. This way, you don’t have to borrow money, use up your retirement savings or sell your house to pay for the care you need.