What is Long Term Care Insurance?

August 18th, 2011 | Author: Mitch Reynolds

What is Long Term Care Insurance and How Does It Work

This article, what is long term care insurance, is the seventh in a series of articles explaining the fundamentals of how different insurance products work. To get a full list of all articles, please go to What is Insurance for the series overview.

Definition of What is Long Term Care Insurance

What is long term care insurance? LTC or LTCI, as it is known in the life insurance industry, is a health insurance product in Canada that provides money for the cost of long-term care needs. The long-term care insurance benefit is not integrated with any provincial financial assistance programs or provincial health care.

People who need long term care are generally not sick in the traditional sense. They are unable to perform some of the 6 basic daily activities of living, such as dressing, bathing, feeding yourself, toileting, continence and transferring (getting in and out of a bed or chair). Another common cause of long term care need is mental/cognitive impairment, caused by diseases such as Alzheimer’s.

Age is not a determining factor in qualifying for a long term care insurance claim, however many of the diseases that can trigger LTC claims are age related. In Canada, about 50% of all people over the age of 65 will need serious long term care in their lifetime. Many of these people will turn to family to provide the in home care they require. It is only at the very severe stages of care need that Canadians are cared for by a provincial long term care facility with 24 hour nursing care.

How you can claim a long term care insurance policy

If you own long term care insurance, the process of making a claim is determined by your doctor. There is an official diagnosis of requiring assistance with any of the 6 daily activities of living which a doctor can diagnose. A long term care insurance claim is eligible once two or more of the 6 daily activities of living require assistance, or you have some form of mental/cognitive impairment that has become severe and requires long term care. Here are the 6 daily activities of living, as recognized by the Canadian Medical Association, the Canada Revenue Agency, and life insurance companies:

Dressing yourself
Feeding yourself
Bathing yourself
Toileting
Continence
Transferring (getting in and out of a bed or chair)

Any form of dementia, such as Alzheimer’s, that has become severe, would also qualify for a claim on its own.

When to buy long term care insurance

Most Canadians looking at long term care insurance would be advised to look at buying the policy in their late 40s through early 60s. The younger you are the more affordable the premiums, plus you could even plan to pay up the policy in 20 years and be done when entering retirement. After your early 60s the policy becomes very expensive and hard to fit into a fixed income budget.

Another important factor is your health. Insurance companies are not concerned with the risk of you dying when setting up this type of insurance. They are concerned with the risk of your needing care. Early signs of dementia, osteoporosis, use of a cane or other mobility devises would all be major concerns to an insurance company issuing this type of policy. When you are younger your health generally should not be a barrier to getting the policy. As you age there is a good chance that regular health complications due to the aging process will make it impossible for you to qualify for long term care insurance.

How does long term care insurance work

Most Canadian insurance companies offering long term care insurance are structuring the plan on a daily or weekly benefit amount. For example, if you bought $100 per day, you could claim $36,500 of tax free health benefits for the cost of your long term care every year. A $1,000 per week benefit would work out to $52,000 of annual benefits.

Long term care insurance policies are broken into two parst: Facility Care and Home Care. The Home Care benefit is optional to be added onto the mandatory Facility Care benefit. With only the facility care benefit you would not be able to claim on your long term care insurance policy if you were receiving care at home, even if it was from a professional home-care nursing company. By adding the home care rider to your long term care insurance policy you will receive benefits in both a long term care facility or in the comfort of your own home.

You can also buy a certain length of benefits or an unlimited policy. Benefits could be for as little as 2 years, 5 years, 10 years or unlimited. The unlimited policy is obviously the most expensive because the insurance company might have to pay benefits for many years.

The long term care insurance benefit is paid out either as a direct deposit into the insured’s bank account (accessible by the individual or their power of attorney looking after their care needs) or it is paid as a reimbursement of eligible medical expenses. Some Canadian insurance companies make payments directly to the insured’s bank account while others require claim forms to be filled out and reimbursements to be paid back to the insured. Be sure to ask your insurance broker which type of policy it is and how claims will be paid.

There are other riders that can be added to the policy, like inflation protection and return of premium at death if you never used the policy. You will have to examine the cost of these riders and determine if the benefit is adequate for the increased price.

The need for long term care insurance

There are many reasons why you might need long term care insurance. It provides a tax free health insurance benefit to help you pay for the high cost of care. Here are a few ways you might use the proceeds of a long term care insurance policy:

Pay for professional nursing and home care in your own home
Reimburse family for lost income and expenses who are helping to take care of you
Pay the higher cost of a private or semi-private long term care facility
Pay for additional/optional services in a government run long term care facility

What is Long Term Care Insurance – Find out more from Life Guard Insurance

If you are interested in planning for your care needs, making sure you have the quality of care and the dignity of life you want in your old age, a long term care insurance plan might be right for you. Feel free to contact Life Guard Insurance to answer the question what is long term care insurance for your unique care needs.

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