Consider long-term care assistance

We’re all living longer and, in many cases, enjoying unprecedented good health in old age. But that news comes with a real cost. As our life expectancy extends, the need for long-term care becomes more important. Whether you’re planning for your own future needs, or those of a parent, you must be careful in long-term financial planning.

Life expectancy for a 65-year-old female in 1979 was 84; for a male, 80. In 2012, life expectancy increased to 87 and 84, respectively. Even if you’re in good health and have planned your retirement dollars to stretch the extra distance, it’s impossible to predict the future and many of us may require living assistance.

So what’s the cost of living assistance?

It varies, of course, but in Ontario, the government funds all personal and nursing care that’s provided by long-term care homes. You must pay the cost of room and board, however, and the government sets those rates. Basic room and board is $1,731 monthly, semi-private costs $2,066 monthly, and private will set you back $2,438 monthly. More expensive facilities can cost as much as $7,000 to $10,000 a month for private rooms and suite arrangements.

Most people prefer to remain in their home to receive care. In Ontario, in-home meal preparation can cost between $13 and $30 an hour, personal care $13 to $30 an hour, and skilled nursing $23 to $70 an hour.

How can you pay for it?

There are a few ways to fund living assistance:

• by using investment proceeds or personal savings;
• selling now unused property;
• purchasing annuities;
• withdrawing money accumulated in life insurance contracts; or
• taking out long-term care insurance.

Long-term care plans provide weekly or monthly cash benefits. With these plans, you can determine the amount of the benefit, the length of benefit payments and when payments begin.

Once issued, the contract’s provisions and renewability are guaranteed. Most companies reserve the right to increase or decrease the premiums, but they can only do this in certain circumstances (e.g., if the insurer experienced higher-than-expected claims for men aged 60-70, and you’re a man aged 60-70, your premium rises).

The policyholder qualifies for monthly benefits when he can no longer perform two out of six activities of daily living (ADLs), or he has a cognitive impairment. The six ADLs are feeding, bathing, dressing, transferring, toileting and incontinence.

The cost for the long-term care contract is based on the plan’s terms, and the age and gender of the insured. A female contract is more costly because of longer life expectancy. Some contracts include an inflation protector, which increases monthly premiums. A $3,000 monthly benefit with a 90-day waiting period, a lifetime benefit period and lifetime payment period for a 65-year-old male would cost $285.80 monthly. The same contract for a 65-year-old woman would cost $397.28 monthly.

More people tend to get approved for long-term care than critical illness, disability or life insurance, because the underwriting is less stringent.

There’s no one solution for everyone. So plan now and you won’t be left scrambling with fewer options when the need arises.