At senior age, it's very likely that we'll run into a situation when we'll need daily assistance in our living. According to the Underwriters LTC council in Canada, the likelyhood of needed long term care reaches 50 percent after the age of 75. This article deals precisely with this issue and teaches the basic definitions associated with long term care policies.
Definition - long term care insurance will pay the insured individual a tax-free benefit every week, if their medical condition requires to be given assistance with two out of the six activities of normal daily life. Bathing, eating, dressing, toileting, maintaining continence and transferring are all among these activities, but the specifics are different for each policy. It can help you to prevent depleting your savings or forcing your family into dept due to unplanned medical expenses associated with the changes in lifestyle.
The basic need for long term care - Every seventh Canadian is a senior citizen today and belong to the faster growing group in population. With the shrinking tax base that results from the rapid aging of working force and increasing medical costs, there's a certain need to gather additional finances which will cover these expenses. In reality, long term care protects the assets and health of two generations - both active income earners (who would need to find extra financial and emotional resources to care for their retired relatives) and senior citizens, who are dependent on their savings.
Temporary long term care vs. Ongoing long term care - it's important to note the differences between the two to understand your coverage. Temporary care occurs for weeks or months, and is generally used to describe rehabilitation periods from a hospital stay, recovering from surgery, illnesses or injuries or terminal medical conditions. Ongoing long term care means the need of assistance in case of chronic medical conditions or chronic severe pain, permanent disabilities or dementia.
Skilled care vs. Custodial care - another difference which is important to touch upon. Skilled care refers to services which can be provided only by licenced medical personnel. Custodial care refers to those services and supplies which can be given by any individuals without a specific skill set, provided that through documentation and a treatment plan is approved by medical supervisors. Some long term policies only cover skilled care.
Setting - long term care can be provided at home, in the home of a family member or friend of the recipient, adult day services location, in an assisted living facility or board-and-care home, hospice facilities or nursing home. This is an important point - many policies have limitations and pay off only when facility care assistance is required and do not cover home care.
Elimination periods - another important aspect of long term care policies which refers to the amount of time which must pass before you begin to receive your weekly benefit. The benefit period determines how long you'll receive the coverage for.
Premiums - premiums are determined by three factors - the elimination period, benefit period and the amount of daily benefits. Pay extra attention to premium caps, as most LTC policies in Canada offer guaranteed premiums only for the first 5 years after the policy takes effect.
Riders - long term care plans have several riders which are worth looking at. The most important ones are the "cost of living adjustment" and "return a premium" riders. The former allows the benefit to be raised according inflation, whereas the return of premium benefit returns the premiums to your beneficiary in the event you pass away.
As the last words in this article, I would like to stress the importance of working with an independent insurance professional, to ensure a larger pool of available options and unbiased advice compared to captive agents.
Lorne S. Marr has been a very accomplished financial planner since 1993 and runs his own company LSM Insurance Services Ltd. He's recognized as an industry leader thanks to the commitment to providing clients with value-added services. Find more information about long term care on his website: Life Insurance Canada.
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