Critical illness conversion to long-term care

BY ANDREW STEWART

Today I was thinking about healthcare and how we can prepare for the decline of it in our retirement years. Like myself most of my clients are in the midst of their earning years and are tending to growing families, bills and the onslaught of to do lists. A client and friend of mine who is only 46 and not even close to retirement has had their retirement goals severely hampered by an unexpected illness. So many people underestimate the value of their health and take for granted that it will be there in retirement. The truth is that government health insurance, much like health insurance you receive from an employer while working full-time, likely isn’t going to cover everything you need.

People often view retirement as a static state of being: you go on a lot of vacations, spend time with the grandkids, golf or take walks every afternoon, and read your favorite novels every day. Then you go to sleep, wake up, and do it all over again. But the truth is that retirement is so much more dynamic than that vision we all have of this period in our lives. Most people will have between 20-40 years of retirement. This is why it’s incredibly important to focus on planning for the very real possibility of health hiccups along the way.

Most people have either heard about or maybe even have critical illness policies. No one plans to be sick, but what’s your plan if you do suffer a serious illness.

A quick recap of what a critical illness plan is:

This coverage provides you with a lump sum, tax-free benefit if you are diagnosed with any of covered critical conditions. You can also depend on additional partial benefits for non-critical conditions. A serious illness can require extended time off or even stepping down from your job. Critical illness insurance provides an essential security that allows you to take the time to treat and manage your condition without the worry that income loss can have on your lifestyle, your family’s wellbeing, or your treatment options.

A nice surprise that most people aren’t aware of is if you are blessed without ever having to make a claim, some policies allow you the benefit of converting all or some of your coverage to long-term care insurance from age 55 to 65 without proof of insurability. Now admittedly that won’t mean much to a 35 to 45 year old who believes they are superhuman and the most they will catch is cold. But let’s look at what a long-term care policy will cover.

A quick recap of what long-term care insurance is:

Long-term care insurance is paid out when the insured requires help with at least two daily living activities such as bathing, dressing, transferring, toileting, continence and feeding, or if there is cognitive impairment, an accident, illness or deteriorated mental abilities. You should consider this coverage if your family has a history of health deteriorating illnesses and you’re worried that you won’t have help from family or friends. You want to protect the wealth and your dignity by choosing the type and level of care that’s right for you. Although the wealthy are able to shoulder their own long-term care costs, and governments tend to step in for those without the finances necessary to do so, it’s the middle class who are most affected. In many cases, adult children end up bearing the costs if the elderly parent can’t pay for the care. We are more concerned about paying off debt and buying a house than planning for long-term care in our golden years.

Research shows that Canadians continue to live longer. According to the Conference Board of Canada, more than 2.4 million Canadians aged 65 or older will require paid and unpaid care support by 2026.By 2046, that number is expected to rise to 3.3 million people, which is almost 10% of Canada’s current population.