Is long-term care insurance a good choice for you?

October 01, 2013 • Financial Planning, Insurance Planning, Lifestyle, Retirement Planning

Canadians are increasingly realizing that lengthening life spans mean that they may need to save more for retirement than they had previously thought. However, many are still not taking the necessary steps to meet their long-term care needs. A recent report by the Canadian Life and Health Insurance Association (CLHIA) indicates that there will be a $640 billion gap in the funding Canadians will need to finance their long-term care requirements.1

Much of that gap stems from the fact that while baby boomers (the first of whom turned 65 in 2010 and who are now retiring in droves) are increasingly preparing for their golden years, many do not yet recognize that those years might not all be healthy ones. In fact, according to Statistics Canada, the healthy life expectancy of Canadians is considerably shorter than their actual life expectancy. Women and men can expect to live on average 83.6 and 78.9 years, respectively. However, their Health Adjusted Life Expectancy (HALE) is just 72.1 and 69.6 years.2 That means, on average, Canadian men and women will live between nine and 11 years with compromised health and may need assistance with the activities of daily living, such as bathing, getting dressed, and eating.

The high cost of care

Long-term care insurance is designed to address services that they will need during that time. These can range from assistance in the home to round-the-clock care in an institution for those who become disabled by Alzheimer’s and other diseases. These expenses can add up. For example, the average costs of a daily hospital bed, a long-term care bed and home care are $842, $126 and $42, respectively.1

The need for solutions to address these issues is increasing. The federal and provincial governments, both of which provide healthcare funding (although health is a provincial jurisdiction), cover only a few such services. Furthermore, budgets at both levels of government are tightening.

The CLHIA notes that in 2011, 7,550 hospital beds, or roughly 7% of the Canadian total, were already occupied by long-term care patients. Retiring boomers threaten to cause that number to spike in coming years, giving governments a strong incentive to “pass the buck” to consumers.

The federal government may be tempted during coming years to limit the growth in health-related transfer payments to the provinces. Cash-strapped provinces in turn may reduce the number of hospital beds that they make available for long-term care patients. These trends imply that Canadians will be increasingly called upon to look after themselves.

Sadly, most seem ill-informed about the implications. A poll of Canadians aged 60 years and over conducted on behalf of the CLHIA found that 67% of those surveyed had no financial plans to cover long-term care expenses. More than half had no idea of the costs involved.

Balancing priorities

With many demands on your cash flow, it can be difficult to juggle priorities. One thing is certain: The sooner you start to plan, the easier it is to prepare for your future needs.

Whatever your situation, please remember that we’re here to help. If you’re younger, we can help you explore cost-effective ways to ensure you will get the care you need when you’re older. If you’re not so young, we can help you review your resources and options and help you make the decisions that are best for you.

The reality of aging in Canada

  • On average, Canadian men will spend nine years of their lives with compromised health; for women, the figure is 11 years past the time when they are healthy.2
  • 67% of Canadians have no financial plans to cover long-term care expenses.1
  • The average cost of a daily hospital bed, long-term care bed and home care are $842, $126 and $42, respectively.1

1 Canadian Life and Health Insurance Association, Report on Long-Term Care Policy, June 2012
2 Statistics Canada: Health Adjusted Life Expectancy

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