Understanding long term care insurance
As every year goes by we in North America become an older society. The Baby Boomers make up the majority of the population. Though no official definition of a Baby Boomer exists, typically it is someone born between 1946 and 1965. Therefore the first of the Baby Boomers are 66 years old right now. Many projections have the population with more people 65 and older than 15 and under by 2015. Not only will we have more seniors than ever before but we are also living longer than ever before.
Longevity impacts our retirement.
Greater longevity means we require income for much longer because we are living longer, more active lives. It may also mean we can live longer but with illnesses. We use to get sick and die, now we get sick and live. That can have a negative impact on your retirement portfolio. Increased income demands because of our health can decrease how long your money will last.
Baby Boomers are seeing first hand how living with illness can affect retirement portfolios. They just have to watch their parents. Baby Boomers are seeing their parents living with illnesses like Cancer, Alzheimer’s, etc and seeing the potential drain on their income. Some parents of the boomers are moving into the homes of their children to save money and to be closer to the care giver, which typically is the child of those parents.
How do you protect your income in retirement from illness?
One solution is Long Term Care Insurance. Personally owned Long term care (LTC) insurance has been around in Canada for several years now. Simply put, LTC will pay the insured a weekly or monthly income if they cannot do 2 of the 6 aids to daily living (ADL). ADLs are(for the most part): Bathing, Dressing, Transferring, Toileting, Continence and Feeding.
Long term care insurance plans enable the insured to perhaps stay at home and hire private care to come to the house or the insured can use the payment to pay or help pay the rent for a Long term care facility. Care facility costs in Alberta can range from $1400 to $1800 per month (or higher) depending on what type of accommodation one chooses. Without LTC coverage, that is $16,800 to $21,600 out of someone’s retirement income. This would lead to a significant decrease in lifestyle and/or a rapid decrease in the amount of retirement money someone has saved.
Shop wisely and do your research
A personally owned long term care insurance plan can go a long way in protecting money saved for retirement as well as selecting the type of care one will receive. In Canada today there are many types of plans provided by many companies. It is important to compare definitions of when the benefits are paid, guarantees on the premiums one pays for the plan, payment options, duration of payments as well as benefit types (comprehensive or facility). Comprehensive typically means the benefit is paid no matter where the insured is living and Facility means the benefit is paid if the insured is receiving care in a Long Term Care facility.
As mentioned before, we are living longer and living longer with illness. Protection of our hard earned savings is important to our retirement lifestyle. For many, retirement could be as long as or longer than they worked. We must insure that we don’t run out of money before we run out of time.