Long Term Care Insurance is the Rodney Dangerfield of insurance — it gets no respect.
The product is widely ignored despite the fact that Baby Boomers are already turning 65 and 25% of Canadians will be over 65 by the year 2036. We develop more health problems as we age — so why aren't more people buying this kind of insurance
The Canadian Life and Health Insurance Association reports that 74% of Canadians admit they have no financial plan in place to pay for long term care in their retirement planning. That will make things very difficult given that the current costs of care in long term facilities can easily exceed $5,000 a month. Personal care at home ranges from $12 to $90 an hour.
Here are five top reasons why LTC insurance has not taken off:
1. "The government will take care of me" We live in a great country with socialized medicine that looks after many of our needs and we assume this will continue. However, many of the items covered by LTC insurance are not covered by the government, such as private nursing care, rehabilitation and therapy, personal care helping with daily activities such as dressing, eating and bathing and homemaking services like cleaning, laundry and preparing meals.
2. "It's expensive" It depends on what you are buying. There are ways to reduce the costs, including “pooling” coverage between you and your partner, selecting fewer options and lower benefits. Some policies return all the premiums if no claims are paid.
3. "I'm young; I don't need it" An unforeseen accident or illness can be debilitating at any age, requiring around-the-clock care. People are usually healthier when they are young so that's the best time to buy almost any kind of life and health insurance. If you have been declined elsewhere you can probably still qualify for Simplified Issue LTC insurance.
4. Advisor apathy Fewer than 25% of all advisors in Canada have ever sold a living benefits policy (includes critical illness, long term disability and long term care insurance). If advisors and insurance companies are not talking about LTC, consumers won't know about it either.
5. People hate buying insurance Most people prefer spending money on vacations and home improvements. We all have car and home insurance and most of us should have life insurance of some kind. There is a five times greater likelihood of getting sick before age 65 versus dying but trying to navigate the maze of available insurance products out there can be a daunting challenge, especially online. Sitting down with a certified financial planner with expertise in retirement and estate planning will help.
LTC insurance coverage has a number of benefits, and you have to weigh the possibility of requiring long-term care in the future as part of your comprehensive estate planning or explore other ways to self-fund the care, perhaps with less expensive joint last-to-die insurance or an annuity down the road.