Not getting any younger: A look at long term care insurance in Canada

Not getting any younger: A look at long term care insurance in Canada Inside the underwriter’s brain: Four CI case studies whose outcomes may surprise you Timely template letter: Critical information on critical illness insurance Taking what you can get: Advice on handling the hard-to-insure Living and linking: Your guide to more living benefits resources […]

By Andrew Rickard | March 31, 2003 | Last updated on March 31, 2003
5 min read

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Coverage varies

Exactly what services are covered can vary widely. LTC plans may provide funding not only for various levels of institutional and home care, but also for adult day care, respite and palliative care. Of particular importance are the eligibility criteria that determine when the client is eligible to collect insurance — a client may have to be unable to perform a certain number of key daily activities (e.g., eating, dressing, etc.), have a diagnosis of a cognitive impairment such as Alzheimer’s or require a physician’s order. Obviously the broader the eligibility requirements, the more likely it is that the client will be able to collect.

How much is enough?

Determining how much insurance to purchase can be difficult, since one is attempting to predict the future cost of healthcare. In Jacqueline Figas’s book Evaluating Long Term Care Insurance, she does an admirable job compiling data for the current cost of different levels of care across Canada. The numbers vary widely, ranging from $40 to $50 a day for a bed in for a nursing home ward to $4,000 a month for a high-end retirement home.

Figas suggests that when calculating the amount of benefit, advisors consider including more than the current cost of basic facility care to provide for greater flexibility. Adding a bit extra to the basic amount will not only help deal with the issue of inflation, and but could also provide additional funds for medication, adaptive devices or even minor home renovations. Figas puts the average LTC benefit amount at about $100 to $150 a day or $3,000 to $4,500 per month.

Seeing beyond seniors

As for target markets for LTC, those approaching retirement or newly retired appear to be the most receptive. LIMRA data shows that in 2001, the age of buyers ranged from 31 to 84, with an average age of 61. When prospecting for new business, however, don’t just limit your activities to clients who may purchase the product for themselves — those who care about the well-being of their parents or grandparents may have just as much motivation to buy.

While on one hand the future threat of reductions to government healthcare benefits creates more interest in LTC, it could also generate headaches for financial advisors. Clients who purchase policies today should be warned that premiums will likely increase to compensate for what the government scales back. But clients understand that one gets what one pays for — rather than being outraged at the increase in cost, they’ll be thankful to have appropriate protection in place.

• • •

Looking for more information on other living benefits products? The growing pains of critical illness insurance are discussed in the cover story of April’s Advisor’s Edge. To register for a free one-year subscription or to view archived Advisor’s Edge articles, please click here.

• • •

Andrew Rickard is a freelance writer and translator in Toronto, Ontario. A Certified Financial Planner with G.P. Capital Management, he’s also managing editor of the Canadian Journal of Life Insurance and Financial Services. He can be reached at andrew.rickard@sympatico.ca.

(04/01/03)

Andrew Rickard

Return to Ensuring your insurance expertise main page

Coverage varies

Exactly what services are covered can vary widely. LTC plans may provide funding not only for various levels of institutional and home care, but also for adult day care, respite and palliative care. Of particular importance are the eligibility criteria that determine when the client is eligible to collect insurance — a client may have to be unable to perform a certain number of key daily activities (e.g., eating, dressing, etc.), have a diagnosis of a cognitive impairment such as Alzheimer’s or require a physician’s order. Obviously the broader the eligibility requirements, the more likely it is that the client will be able to collect.

How much is enough?

Determining how much insurance to purchase can be difficult, since one is attempting to predict the future cost of healthcare. In Jacqueline Figas’s book Evaluating Long Term Care Insurance, she does an admirable job compiling data for the current cost of different levels of care across Canada. The numbers vary widely, ranging from $40 to $50 a day for a bed in for a nursing home ward to $4,000 a month for a high-end retirement home.

Figas suggests that when calculating the amount of benefit, advisors consider including more than the current cost of basic facility care to provide for greater flexibility. Adding a bit extra to the basic amount will not only help deal with the issue of inflation, and but could also provide additional funds for medication, adaptive devices or even minor home renovations. Figas puts the average LTC benefit amount at about $100 to $150 a day or $3,000 to $4,500 per month.

Seeing beyond seniors

As for target markets for LTC, those approaching retirement or newly retired appear to be the most receptive. LIMRA data shows that in 2001, the age of buyers ranged from 31 to 84, with an average age of 61. When prospecting for new business, however, don’t just limit your activities to clients who may purchase the product for themselves — those who care about the well-being of their parents or grandparents may have just as much motivation to buy.

While on one hand the future threat of reductions to government healthcare benefits creates more interest in LTC, it could also generate headaches for financial advisors. Clients who purchase policies today should be warned that premiums will likely increase to compensate for what the government scales back. But clients understand that one gets what one pays for — rather than being outraged at the increase in cost, they’ll be thankful to have appropriate protection in place.

• • •

Looking for more information on other living benefits products? The growing pains of critical illness insurance are discussed in the cover story of April’s Advisor’s Edge. To register for a free one-year subscription or to view archived Advisor’s Edge articles, please click here.

• • •

Andrew Rickard is a freelance writer and translator in Toronto, Ontario. A Certified Financial Planner with G.P. Capital Management, he’s also managing editor of the Canadian Journal of Life Insurance and Financial Services. He can be reached at andrew.rickard@sympatico.ca.

(04/01/03)