Long-term care insurance: Yes or no?

What happens if you or a loved one has to go into a nursing home at some point? Who pays? The answer is more complicated than you might think.

Nursing home care, now more often referred to as long-term care, is not covered under Canada’s national Medicare plan. However, all provinces do contribute towards these expenses. The Ontario Ministry of Health and Long-Term Care, for example, pays for expenses relating to nursing and medical care. However, residents of these facilities are expected to contribute towards their own room and board. This can cost from $16,000 to $20,000 annually depending on the type of accommodation, according to the Ontario Long Term Care Association. In Alberta, the annual cost to the individual is between $11,000 and $12,000 annually.

Even with government support, however, the life savings of a middle-class family can be wiped out in a very short time. Good planning can prevent this and ensure proper care.

Review current coverage
The first step is to review your employer or private extended health care coverage. See if it offers any long-term protection. If it does, it’s probably limited either in terms of the lenh of time allowed or the annual cost. Home care for any long-term debilitating illness will likely be treated in a similar way, if it is part of the package at all.

Families that must pay for such care have two alternatives — pay cash or rely on special long-term care insurance.

Paying in cash is an option only for the very rich. Although long-term care policies tend to be more expensive if you wait until your 70s to purchase them, the cost can be reduced by co-insuring the risk—using what you can afford of your assets and income to pay some of your long-term care costs, should the need arise. More companies are offering long-term care policies and the cost and benefits can vary significantly according to the plan selected. A typical policy covers two types of long-term care.

Facility care. This coverage picks up your share of the cost if you enter a long-term care institution on the advice of a doctor. Protection is usually for the rest of your life.

Home care. This covers expenses arising from prolonged home confinement, such as 24-hour nursing care. The time period is often limited, typically to a maximum of two years. You may find that the coverage only kicks in after the first 60 days. Important: If you’re considering this coverage, take a close look at the benefit levels. Compare them to the actual costs that you would be facing, after the province pays its share. If you don’t need the maximum allowable benefit, ask to have it reduced. That will lower the premium.

Long-term care insurance can be very expensive. A couple aged 65 and 66 was recently quoted a combined premium of $5,645 a year by a major insurance firm. If your province provides a high level of financial support, such coverage may not be worth the expense. Weigh the options carefully and get all the facts before deciding.