If you fall within the Baby-Boomer or Gen X groups, you'll count among 9.8 million senior citizens by 2036, according to Statistics Canada. And if you're currently between the ages of 40 and 60, you've started planning for retirement by putting money away in an RSP or pension.
For some, this is the extent of their planning. Not many people consider what might happen if they become sick with a chronic illness. Current research shows that chronic illnesses like Alzheimer's will be become more prevalent over the next 30 years. In fact the Alzheimer Society of Canada predicts that 1.2 million Canadians will suffer from dementia by 2038, which means that the need for long-term care services will increase. Currently, assisted living services can cost up to $50,000 a year. In the next 20 to 30 years, it's expected that the need and cost for these types of facilities will increase substantially.
But taking time now to plan ahead is key to ensuring that you and your loved-ones won't become financially burdened if you lose your independence during retirement. Here's some facts about long term-care insurance:
What is long-term care insurance?
Long-term care insurance protects the insured and their family from financial hardship due to unforeseen medical and/or living expenses related to critical illness, which results in the loss of independence.
How much does it cost and how long would I need to pay?
The cost depends on several factors like your age, health, the insurance provider and the type of policy that you select. Some policies are set up with 20-year or lifetime periods. The actual term of the insurance will depend on the supplier and the policy.
Who's eligible for this insurance?
Anyone between the ages of 18 and 80 is eligible. However, people in their 40s and 50s should consider including it as part of their retirement plan.
Under what circumstance would I receive a payout from this insurance?
During your retirement, the insurance would payout if you became sick with a chronic illness that prevented you from living independently. This is determined if you are unable to eat, dress, move, use the toilet or bathe by yourself.
What does long-term care insurance cover?
Once it's been determined that you're no longer able to live independently, long-term care insurance will help pay for:
- Expert medical advice
- The ability to live at home with in-home and/or respite care
- Assisted living and long-term care facilities
- Senior day-care
How is it paid out?
Long-term insurance pays a tax-free monthly benefit that can be used to pay for any type of service that you choose. There's no need to submit receipts or wait for approval.
Which policy offers the most appropriate coverage?Speak to your insurance broker to find out what would be best for you. For more immediate answers, call me.
Bill Clunas is a Certified Financial Planner with Desjardins Financial Security Independent Network and Branch Manager-Mutual Funds with Desjardins Financial Security Investments Inc. located at 114-700 Richmond Street, London, Ontario. Phone: 519-438-1730 Fax: 519-438-6518.