Four Ways To Pay For Your Long Term Care

Four Ways To Pay For Your Long Term Care | Promod Sharma

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CARP Etobicoke | 2015-02-25

Promod Sharma | FSA, FCIAInsurance [email protected] | 416-938-3711

Four Ways To Pay For Your Long Term Caremoney for loss of independence

INSURANCEADVISORY

“pro-MODE”




Eating Bathing Dressing

ToiletingTransferring

PositionsMaintaining Continence




Source: Aleksey Kashinbit.ly/PShoc




Familial Early Onset Alzheimer's




Source: Barry King http://gty.im/459731272

Wash Westmoreland

RichardGlatzer




Source: Barry King http://gty.im/459731272

Wash Westmoreland

RichardGlatzer

“It’s been a struggle. We were both born with plastic spoons on our mouths so don’t have much financial cushion.”— Sep 2014Filmmaker Magazine




Source: ???




If you can’t take care of yourself, who will look after you?




SCARY STATISTICS




74% of Canadians have no plan to pay for long-term care— CHLIA/Leger poll (June 2012)




How Money Helps

Offset the costs of the extra care

Maintain the quality of life

Protect your retirement savings

Preserve your estate for your heirs




PAYING FOR LONG TERM CARE

Option 1: Rely On The Government




Option 1:Rely On The Government

How much help is available now?

How much will be available in the future?

Nonfinancial costs Loss of flexibility

Loss of control

Restrictions and rules

Waiting




Many Canadians Expect To Pay Nothing For Health Services

Free Home care: 76%

Free Long term care residence: 78%

Free Nursing home residence: 79%

Source: Sun Life Canadian Health Index 2014

Only 10% have Long Term Care Insurance




What You Pay

What’s Covered





Option 2: Self-Insurance




Option 2:Self-Insurance

You use your own savings

May depletes funds safeguarded for Your spouse’s care

Your heirs

How large a financial cushion do you want?

How much money are you able to save?

How much stress can you take if you’re wrong?





Option 3: Permanent Life Insurance




Option 3:Permanent Life Insurance

Replenish your savings at death money for your spouse and heirs

Sell your unneeded life insurance to aninvestor Allowed in the US

and 4 provinces

Illegal in Ontario

Search: YouTube TaxevityKahan




75+ Interviews at youtube.com/taxevity





Option 4: Long Term Care Insurance




(sample) Two Ways To Qualify For Benefits

Require continual supervision due to

deterioration in mental abilities

Caused by an organic brain

disorder

Unable to perform 2+ Activities of

Daily Living

Require substantial assistance




Who Buys Long Term Care Insurance?

Retirees and pre-retirees

Couples (married or common law)

Women with care-giving experience

Understand the challenges

Children of aging parents




Design 1Delayed: Stop-Loss Insurance

Big deductible

Use your own assets for 1-2 years

Get insurance benefits beyond

Designed to reduce claims

E.g., no benefits before age 65 or during the first five years




Design 2Limited: “Gift Card”

Limited Use the balance, which reduces the amount left

May be available with critical illness insurance

E.g., $1,000,000 available Benefit: 1%/month = $10,000 per month

Duration: 100 months (8.3 years)




Design 3Unlimited

Pays as long as you live

Like a lifelong annuity

Provides peace of mind but costs more




Basics That Effect The Price

Your age, health

How large a benefit you want

How long you’re willing to wait before benefits start

How long you want the benefits to last




Optional Extras

If you have no claims, do you want your money back?

Get return of premium on death

Do you want protection against inflation?

General inflation, not medical inflation




Taxation




Taxation

Since you pay the premiums with after-tax dollars, the benefits are likely tax-free

Check with your tax expert




Caveats With Long Term Care Insurance







Be Aware

Select an insurer known for keeping promises

Must satisfy the definitions in the contract

Example: Eating

Sample definition: Feeding yourself from a cup, bowl or plate, or by a feeding tube

Excludes: preparing or serving your meals




The Price

Long Term Care Insurance may look expensive Compared to what?

The premiums are not guaranteed Unlike life insurance, disability insurance, critical

illness insurance

Plans only available from a few insurers

No standard design




A Better Design For Long Term Care Insurance [Not Available]

Guaranteed premiums

Or transparent criteria for changing the rates

Benefits indexed to medical inflation

Public data on claims paid and denied

Tax incentives for purchase (like RRSP, TFSA)

More competition




Group Discussion




http://www.meetup.com/CARP-Etobicoke




Wrap-up




1: Poverty 2: Criticism

3: Health 4: Love

5: Age 6: Death1937




Eating Bathing Dressing

ToiletingTransferring

PositionsMaintaining Continence




Paying For Long

Term Care

Self-insurance

Government insurance

Private insurance

Health & Medicine

Four Ways To Pay For Your Long Term Care