Is LTC insurance the best way to protect your future?

James Rodriguez James Rodriguez  updated on 2022-06-24

Planning for retirement is, for many, a comprehensive process designed to prepare your family for well-deserved rest and relaxation after decades in the workforce. Between life insurance, pensions and registered retirement savings plans, you probably covered all the basics long ago.

As you age, however, you may find yourself concerned that the cost of care will exceed your savings. Rather than rely on loved ones or sacrifice independence, many Canadians have opted to purchase long-term care insurance to cover the cost of specialized nursing and health care. 

In this guide, we’ll review the advantages of purchasing private long-term care insurance to supplement your provincial health benefits, as well as the best long-term care insurance companies in Canada. 

What is long-term care insurance?

Long-term care insurance, sometimes called LTC insurance, is designed to help you and your loved ones cover the costs of supplementary health support that may become necessary as you age. 

If, for example, you experienced decreased mobility later in life and need assistance with day-to-day personal care, LTC insurance can ensure that you’re able to hire the help that you need. 

LTC insurance also enables those living with chronic illness or recovering from an injury to receive the support they need to maintain independence and quality of life.

Who needs long-term care insurance?

Arguably, anyone can benefit from long-term care insurance. For some, however, securing coverage for additional health and living support later in life may be more important than for others. 

  • At age 45, Michael manages his diabetes with a combination of a sensible diet, regular exercise and metformin. He’s aware, however, that he may require more intensive treatment as he ages, including regular injections, as well as in-home support to prevent falls or other injuries caused by low blood sugar. 
  • Camille, a widow, wants to remain in her own home as she ages without imposing a financial or personal burden on Catherine, her only daughter. LTC insurance will cover the cost of daily care assistance, allowing Camille to focus on enjoying time with family.
  • Richard, aged 35, has been living in a group home for people with developmental disabilities. His parents, Luke and Emma, want to ensure that he continues to receive the same standard of support once they are unable to provide for him directly. Either a long-term care insurance policy or a disability insurance policy will protect Richard’s quality of life.

Regardless of whether you anticipate the need for additional care as you age, an LTC insurance policy safeguards your quality of life while protecting loved ones from financial surprises.

The annual cost of in-home healthcare can easily exceed $50 000 per year. Purchasing private long-term care insurance ensures that you maintain your independence without depleting your retirement savings or limiting your care options.

What does long-term care insurance cover?

In addition to home healthcare, including round-the-clock nursing, your LTC insurance benefits can bridge the gap between the cost of a nursing home and provincial healthcare benefits. 

Comprehensive policies may also include coverage for adult day care, assisted living, occupational therapy, rehabilitation and daytime assistance with personal care tasks, such as bathing, dressing, eating and toileting.

Your long-term care insurance policy can also protect you in case of an accident or serious illness that prevents you from working for more than 90 days. Instead of draining your savings to pay for supplemental healthcare or therapy, you’ll use the tax-free benefit paid by your insurer to cover these costs.

Long-term care insurance benefits cannot be used to compensate family members for time or expenses associated with in-home care.

When to buy long-term care insurance?

Purchasing LTC insurance earlier rather than later can add up to significant savings in your premiums. Financial planning experts recommend that your long-term care insurance costs shouldn’t exceed more than 5% of your monthly income - a ratio that’s much easier to achieve when you buy your policy while still actively working.

And while we tend to think of LTC insurance as a concern for those 55 and older, accidents and debilitating illnesses can strike at any age.

Be aware that waiting to purchase long-term care insurance in Canada may prevent you from buying a policy at all. Most long-term care insurance companies will not allow you to purchase a policy if you currently cannot perform two or more qualifying daily activities listed in the policy, such as dressing, eating or toileting.

Speak to a certified financial planner to learn more about how long-term care insurance can protect you and your dependents. 

How does long-term care insurance work?

Generally speaking, Canadian long-term care insurance follows one of two models. 

Income-style benefit plans will pay out a pre-set benefit amount every month for a set period. These funds can be used however you wish, provided you use the money to support your care. Most insurers cap the length of time you can receive these payments at two years. Long-term care insurance benefits are tax-free in Canada.

Reimbursement-style plans operate more like typical insurance policies. Provided the care you need falls within the list of qualifying services in your long-term care policy, you will receive reimbursement for those costs. Most insurers cap the amount for which you can receive reimbursement.

To better understand how long-term care insurance in Canada works, let’s consider two examples:

75-year-old Frances has decided to move to an assisted living facility following the death of her partner, Marie. Without Marie’s help, Frances struggles to move about their shared home and can't dress herself without significant difficulty. Frances has chosen a facility a few minutes drive from her daughter’s home but will need to cover the difference between her provincial health benefit and the facility’s fees herself. After an evaluation by her insurer, which concludes that she is unable to perform two essential tasks, Frances will wait for 60 days to begin receiving payments to fund her care at the facility of her choice.

At the age of 69, Christopher slips and falls in the shower, breaking his hip. While his family has the time and resources to support his care at home, Christopher needs daily physical therapy to regain mobility. After contacting the insurer from whom he purchased LTC insurance, Christopher submits evidence that his policy covers the needed services and undergoes an evaluation. Once the 90-day waiting period passes, Christopher can be reimbursed for his physical therapy expenses.

Be aware that all long-term care insurance policies will contain a “waiting” or “elimination” period of anywhere from 30 to 90 days.

Once you make a claim against your policy, your insurer will perform an evaluation to confirm your need for care. Following confirmation, you will begin receiving payments and reimbursement once the waiting period has lapsed.

How to choose long-term care insurance?

When deciding which long-term care insurance policy to purchase, you’ll want to take into account a number of considerations.

Do you already carry disability or critical illness insurance? In that case, you may be able to add long-term care insurance without purchasing a separate policy.

What kind of care do you think you’ll need? If you know you have funds for assisted living or at-home nursing care, you may want to focus on policies that reimburse specific kinds of health support, therapies or rehab.

How much have you saved for retirement? If your primary goal in purchasing long-term care insurance is protecting your savings and legacy, pay close attention to waiting periods. Longer elimination times can draw down your nest egg. 

Insurance providers may offer different deals depending on your home province. For example, there may be different deals for long-term care insurance in Ontario than there are in Manitoba! Use the tool below to see how providers vary their offers between provinces:

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How much is long-term care insurance?

Long-term care insurance costs on average for a 55-year-old man range between $59 and $72 per month, and $66 and $88 per month for a 55-year-old woman.

The cost of long-term care insurance depends on a number of factors, including your age, overall level of health and province of residence when you apply. 

Because different provinces provide different levels of financial support due to individualized pension and benefit schemes, the cost of long-term health insurance in Ontario may exceed the cost of a similar policy in Alberta. 

Other elements that may affect the cost of long-term care insurance include:

  • The amount of coverage you purchase
  • The number of options you choose
  • The length of the waiting period between your request for benefits and payments
  • The length of time covered by your policy

Where to buy long-term care insurance?

To get long-term care insurance in Canada, you’ll need to work with an insurance company directly or purchase through an insurance broker. In many cases, you may not purchase a stand-alone LTC insurance policy, but a rider to supplement to critical illness or disability insurance.

Companies that sell long-term care insurance include:

  • Blue Cross
  • My Dignity

Other companies that sell long-term care insurance offer this benefit as a conversion option on disability insurance policies. 

Learn more about disability insurance in Canada.

Sun Life long-term care insurance, as well as Manulife long-term care insurance, for example, can be purchased as an add-on to a disability insurance policy in the form of a rider. 

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In these cases, you’ll need to satisfy the criteria of the underlying policy to receive a benefit, as well as any additional conditions set out in the rider.

Long-term care insurance in Canada: pros and cons

If you find yourself, “Is long-term healthcare insurance worth it in Canada?” It may help to consider the pros and cons of this particular type of policy.

Pros

  • Peace of mind for you and your loved ones
  • Protects your retirement savings and legacy
  • Almost all adults will require long-term care at some point
  • Income-style plans allow you to spend funds on whatever you choose

Cons

  • Uncertainty in pricing and unpredictable premiums
  • Difficulty predicting the right amount of coverage to purchase
  • Extended waiting periods may delay the payment of benefits

What long-term care insurance alternatives exist?

If you anticipate that you may not qualify for long-term care insurance or have doubts about its value, other options exist to safeguard your golden years. 

If you purchased a long-term disability insurance policy to protect your earning potential until retirement, ask your insurer about the possibility of adding a conversion option. In these circumstances, your insurer will add a rider to your policy allowing you to “convert” your disability insurance to long-term care insurance under certain circumstances. 

Likewise, some insurers offer policyholders the option to convert critical illness insurance to long-term care insurance in exchange for an additional premium. Similar to disability insurance, critical illness insurance protects you from the adverse financial consequences of serious or life-threatening illnesses requiring treatment over and above your standard health coverage.

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