Long term care insurance

Long term care insurance is an insurance policy that covers the costs of long-term health care that is not covered by health insurance. It includes help with the everyday activities of daily living and thus it is focused on caring rather than curing.

This article provides an overview of what long term care is, and how much it costs, followed by basic information on long term care insurance, and a discussion on whether you need the insurance or not.

What does long-term care mean?
Long-term care services may include:


 * nursing care
 * rehabilitation and therapy
 * personal care (help with activities of daily living such as dressing, eating and bathing)
 * homemaking services (cleaning, laundry, preparing meals)
 * having another person there to watch over you and help you when and where you need it

Depending on how much care you need and the choices you and your family make, this care can be received:
 * in your home
 * in the community (e.g., adult day centres)
 * in a facility such as a nursing home, a chronic care facility, personal care home, or assisted living facility

When will I need long-term care?
Your need for health care and personal care will change over time. You’ll likely pass through 5 stages of care, to some degree, in retirement.

The 5 stages of care:

Stage 1: Independence In stage 1, your independence is still intact:


 * You are self-sufficient and able to manage chronic health problems and disabilities without the help of others.
 * There's no immediate impact on your family.

Stage 2: Interdependence In stage 2, independence quickly turns to interdependence:


 * Some health problems begin interfering with daily living, making some functional tasks painful or more difficult.
 * Family members begin helping out more with cooking, house cleaning, shopping and banking, but formal care is not yet in place.
 * Families may begin considering seniors' residences designed for independent living, which feature 24-hour security, suites, meal plans, cleaning services and laundry.

Stage 3: Supportive living In stage 3, you're starting to become more dependent on others:


 * You are more dependent on others for practical chores like meal preparation, cleaning, shopping and transportation, and may need some limited direct help or stand-by assistance with personal-care items such as dressing, bathing and grooming.
 * Both family support and some formal care are in place, and may include: home care services for help with meal preparation and dressing, adult day care centers, assisted living facilities or retirement residences.
 * Whatever the care, the funding is all on you; long-term care services are not part of the Canada Health Act and government-subsidized care is very limited.

Stage 4: Crisis management In stage 4, you're dependent on others, but home care may still be an option:


 * You are dependent on others for most of your care due to multiple health and personal care needs.
 * Family members start to burn out at this stage from the demands of caregiving.
 * Formal home care may be insufficient or too expensive.

Stage 5: Dependence In stage 5, your extensive care needs are being met in a long-term care facility:


 * Admittance to a long-term care facility as skilled nursing care and extensive personal care are needed.
 * Family members are exhausted and can no longer meet the overwhelming care requirements - safety is an issue without 24-hour care

What does long-term care cost?
Long-term care costs are managed at the provincial (or territorial) and community level. What you pay will depend on where you live and the personal choices you make.

Consider this:

It can cost you from $900 to over $3,000 per month to stay in a long-term care facility. Costs for private services range widely: you can pay from $10 to $90 an hour for homemaking, personal care or nursing care.

The cost to you depends on:
 * the type of room you stay in
 * how much government funding is available in your province or territory

The Globe and Mail has an online tool that shows the maximum costs of long-term care in government-subsidized facilities, by province, for different periods of time. This tool also contains links to official government websites detailing the costs for each province, and mentions that "the average length of stay in a long-term care facility is about 18 months".

Typical costs by province and territory
The following reports show typical costs for government-subsidized long term care facilities, for private retirement homes, and for home care, for each province:
 * Alberta
 * British Columbia
 * Manitoba
 * New Brunswick
 * Newfoundland and Labrador
 * Northwest Territories
 * Nova Scotia
 * Nunavut
 * Ontario
 * Prince Edward Island
 * Quebec
 * Saskatchewan
 * Yukon

Types of policies
Long term care policies generally fall into three classifications:
 * Reimbursement policies, where as the name suggests you are simply reimbursed for long term care expenses, typically up to designated limits.
 * Indemnity policies, where the eligible benefit is paid when qualified expenses (actual care) have occurred.
 * Income policies, also know as cash or disability plans, where the eligible benefit is paid without the requirement that qualified expenses (actual care) have occurred.

There are pros and cons associated with each type of policy that should be considered. For example, the Council on Aging of Ottawa considers that income policies are the most flexible and easy to administer, but also the most susceptible to fraud and the most prone to elder abuse.

When will payments start?
With a LT care policy, payments typically only start "when a physician confirms that you are unable to perform two or more activities of daily living and you require professional assistance at home or in a long-term care facility". Some policies require you to be unable to perform more than two activities, which means that qualifying for benefits will be much more difficult.

Activities of daily living include: bathing, dressing, eating, maintaining continence, toileting and transferring (getting in and out of bed or a chair).

Another benefit trigger is "cognitive impairment" or mental incapacity.

According to the Canadian Life and Health Insurance Association (CLHIA), "most plans include a waiting period. This means once you qualify for benefits, you must wait a specified period of time before your benefits will be payable. Common waiting periods are between 30-90 days."

Do you need insurance?
Not everyone will live in a long term care facility before they pass. According to one source, "the likelihood of a 65-year-old ever being in a nursing home is less than 50%". Among those who will ever live in a long term care facility, some might only stay a short time, whereas others will be there for many years, with large total costs which could deplete all of their savings. In other words, the total costs of long term care are not knowable in advance.

Despite this uncertainty, an alternative to long term care insurance is self-insurance. If you have substantial assets, you may be able to cover the possibility of living in a long term care facility for a significant time. One advantage of this method is that you may also use these private savings to purchase services such as "house cleaning, grocery shopping, transportation, and even home care" that are not, or may not be, covered by long term care policies, but may be needed to stay in your own home longer. And if you die without having required long term care services, then your assets will be passed down to your heirs, whereas with insurance, your premiums are gone.

One financial planner interviewed by the Globe and Mail comments that long term care insurance is "very expensive" and that "the cost of coverage requires individuals or couples to often trade off some other very important things that they are allocating to, such as retirement savings".

Another concern is that "once a buyer has been approved by a carrier, premium prices can go up", which means that the coverage may need to be reduced to keep it affordable, or perhaps even the policy cancelled. In more detail, according to the Council on Aging of Ottawa, "if claims become higher than planned for, an insurance company can raise premiums for the entire class of policyholders. However it cannot raise individual policyholder’s premiums because of health status or age".

LTC insurance versus home insurance
Vettese (2016) devotes two chapters to long term care and LTC insurance. He compares LTC insurance with home insurance. With both LTC and a house fire, the odds of a event a low, but the consequences are potentially large. With home insurance,
 * the potential losses are clear and quantifiable
 * the deductible can be set high if desired
 * any loss in excess of the deductible will be covered (up to the limit, but the home reconstruction value is quantifiable)
 * the premiums are reasonable relative to the coverage
 * you can change insurer if your premiums rise

With LTC insurance,
 * the potential losses are difficult to estimate
 * the premiums can rise
 * in many policies, there is no guarantee that the entire cost of LTC will be covered
 * the deductible is low (coverage starts after a relatively short waiting period)
 * the premiums are rather high
 * you can't easily change insurer (LTC insurance is a long term commitment)