Canadians overlook costs of long-term care

By Steven Lamb | January 21, 2005 | Last updated on January 21, 2005
3 min read

(January 21, 2005) Canadians are concerned they will become a burden to their loved ones when they get older, but few are aware of insurance products aimed at minimizing the costs, according to an Ipsos-Reid survey for RBC Insurance.

“The sale of long-term-care insurance, which one would argue is probably the most effective way to deal with this particular need, is in its infancy in Canada,” says John Young, president and CEO of RBC Life Insurance Company. “Various surveys indicate that awareness of the need for long-term-care protection is not high among the Canadian public.”

The RBC Insurance/Ipsos-Reid survey found that 34% of respondents were worried about the cost of care in their old age. The poll also found 40% of Canadians were concerned about having to care for their parents when they got older, although concern seemed to wane with age. Fifty-four per cent of respondents aged 18 to 34 were concerned, compared to 43% between 35- and 54-year olds, and just 22% of those over 55 expressed concern.

Despite this level of concern, though, sales of long-term-care (LTC) insurance have yet to take off in a significant way. “Compared to life insurance, income-replacement insurance and critical illness insurance, there is a small amount of long-term-care insurance sold in Canada,” says Young.

He says part of the problem is the lack of awareness among Canadians, who are quite familiar with other insurance products but have not been exposed to LTC products.

Critical illness insurance has been gaining traction in Canada, covering the short-term costs associated with major illnesses, such as a heart attack or cancer. But it differs from LTC insurance, and can provide for chronic care for those who lose the ability to care for themselves, either through illness, age or a catastrophic injury.

“When somebody begins to lose what we call the ‘activities of daily living’ skills, they tend not to gain them back,” says Young.

Clients of financial advisors usually focus on gathering assets through investments and protecting their nest egg with life insurance. But if the client develops a debilitating disease, such as Parkinson’s or Alzheimer’s, their savings could be rapidly depleted by the cost of daily care.

“I don’t know how many advisors are aware that, if the need for long-term care arises, what a significant impact that can have on an individual’s savings,” says Young. “The cost of long-term care is something that needs to be considered in the financial plan.”

The importance of LTC insurance is highlighted by Canada’s aging population, which will place an unprecedented strain on both nursing homes and home care. The laws of supply and demand may drive the costs of these services ever higher as baby-boomers enter this system.

But LTC insurance should not be thought of as a product for seniors alone. Thousands of Canadians suffer catastrophic injuries as a result of automobile and sports accidents. While such events can shorten the victim’s life expectancy, a 20-year-old suffering brain damage could still require round-the-clock care for decades.

“Awareness of long-term-care needs and long-term-care insurance is just another part of a full-financial security program that an advisor should provide to their client,” says Young. “If you’re holding yourself out as a financial planner and advisor, it just makes good sense that you cover this.

“No one can make their client take action, but you can make your client aware.”

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Poll results are the findings of an RBC Insurance/Ipsos-Reid poll conducted between August 10 and August 12, 2004. The poll is based on a randomly selected sample of 2,000 adult Canadians. With a sample of this size, the results are considered accurate to within plus or minus 2.2 percentage points, 19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population. These data were statistically weighted to ensure the sample’s regional and age/sex composition reflects that of the actual Canadian population according to 2001 census data.

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Steven Lamb