What is long term care insurance in Canada?

By: Updated: July 6, 2022


Many Canadians think that the government health care system will cover all of their costs if they need to move to a long-term-care facility or require at-home assistance with the activities of daily life.

Unfortunately, this is not the case.

That’s why it’s important to consider long-term-care insurance as part of your overall financial plan. In this article, we discuss what it covers, how much it costs and why it may be important. And this insurance is not just for seniors – you could be hit by a debilitating accident or illness at any point in your life. Insurance also provides coverage for mental illness if it leaves you incapacitated.

Let’s look at the big picture. Over the next 35 years, the massive baby boom generation will need $1.2 trillion (yes, trillion!) in long-term care, according to the Canadian Life and Health Insurance Association. Only half of this cost will be covered by current government programs. With the provinces struggling to meet soaring costs for healthcare, we can expect that some of this financial burden will be shifted to individuals.

Now, let’s consider people like you. If you need to enter a long-term-care facility, it will cost up to $5,000 per month. If you are able to stay in your own home but need services such as homemaking and nursing, it can add up to $3,000 monthly. Government programs may cover some of these costs, but you may be expected to reach into your pocketbook for the remainder.


What is long term care insurance in Canada?

LTC insurance will help you defray some of the costs of long-term care. You pay a monthly premium. If you need care at home or must move to a care facility, you will receive a regular benefit.

How do you qualify for the benefit? In order to receive a payout, you must be unable to perform two or more activities of daily living – bathing, dressing and eating.

The compensation can take one of two forms:

  1. You can be reimbursed for care expenses up to a pre-determined maximum set by your insurance policy.
  2. You can receive monthly payments. Similarly, these have a pre-determined maximum.


How much does long term care insurance cost in Canada?

This is a great question. The answer is: “It depends.” The premiums will be impacted by a variety of factors:

  • Age: If you are young, you will be able to purchase Canada long term care insurance at a favourable rate. This is because the likelihood of your needing these services is reduced.
  • Health: If you have pre-existing conditions that may lead to your requiring long-term care, you will pay a higher premium. When you apply for coverage, the insurance company may ask you about your health status.
  • The benefit: The higher the payout, the higher the cost. If you need several thousand dollars in monthly coverage, the premiums will be higher.
  • Waiting period: Most LTC insurance policies don’t pay a benefit until 30 to 90 days after you begin accessing long-term care. Some even have a waiting period of one or two years. With the latter type of policy, you must use your personal savings for this lengthy period. So, while this reduces your premium, you will be making hefty out-of-pocket payments.

As you can see, there are many factors to consider when purchasing long-term-care insurance in Canada. As such, it’s a good idea to contact your financial advisor so that you can look at insurance in the context of your overall financial plan.


Are long term care insurance premiums tax deductible in Canada?

Generally, LTC insurance premiums are not deductible for individuals or businesses. However, check with your accountant!


Can I get my family to care for me instead of purchasing insurance?

Maybe. If you become partially incapacitated, you may be able to remain in your home. However, you may need several hours of care each day for dressing, bathing and eating. Do you have a family member who is willing and able to make this kind of commitment?

Unfortunately, LTC insurance cannot make payments to a family member for the time that they invest in your care. With a large time commitment, they may have to quit their job. This is a lot to ask of them so it may be a good idea to purchase long term care coverage so that you can get professional help to ease your family’s burden.


LTC Insurance Pros and Cons

Here are the pros:

  • Long term care benefits: You will receive payment to reimburse your expenses or a monthly lump sum. These can go a long way towards covering your costs.
  • Peace of mind: Knowing that support is there if you have an accident or chronic illness can reduce your worries.

Here are the cons:

  • Cost: As we have indicated, the premiums can be expensive depending on factors such as age and health status.
  • Opportunity cost: Opportunity cost refers to how you could have otherwise used your money that you are spending on premiums. In this case, you might have invested the same amount in your RRSP or TFSA, helping to grow these funds for your retirement.
  • Limited benefit: The amount of your benefit may not be sufficient to cover all of the costs of living in a LTC facility or receiving care at home. You may still have to pay substantial expenses out of your own pocket.


Is long term care insurance in Canada worth it?

As we have indicated, long-term-care insurance in Canada can help you to defray costs if you have an accident or chronic illness that leaves you unable to care for yourself. Only you can decide whether it is worth it. We suggest discussing it with your financial advisor. They will be able to consider LTC insurance in the context of your overall financial plan.


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