As the Canadian population ages, financial advisors will have greater opportunities to increase their sales of long-term care insurance. But while demographic trends support the need for LTCI, it is not usually top of mind for most individuals — until it is too late.

Essentially, LTCI is part of a “continuum” that includes, among other things, retirement planning, says Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. of Campbellville, Ont.: “Just as you plan for retirement, you need to plan for long-term care.”

The cost and features of LTCI vary widely among insurers, but the policies fall into three broad categories: reimbursement, income and indemnity.

A reimbursement policy pays eligible expenses for approved services up to a predetermined daily, weekly or monthly maximum upon the submission of receipts. These policies are the least expensive but also the least flexible.

An income policy pays a predetermined daily, weekly or monthly benefit for the benefit period, whether or not costs are incurred. The client is not required to use the benefit for a specific purpose. These policies are the most expensive and the most flexible.

An indemnity policy falls in between, in terms of cost and flexibility: a predetermined daily, weekly or monthly benefit is paid, provided that qualified expenses have been incurred for the actual number of days that care is received.

Most people believe the government will provide for their long-term care, says Tim Landry, an independent living-benefits consultant in Montreal. But the care provided under public programs can be very limited. Although provincial governments subsidize a certain level of long-term care, their resources are limited and, in many cases, underfunded. Public facilities also tend to have long waiting lists of up to a year, which can cause a great deal of inconvenience.

As well, Geller suggests, company group benefit plans do not generally cover long-term care expenses.
@page_break@To put the demand for long-term care in perspective, an October 2008 study by the Council on Aging in Ottawa states: “For those over age 65, 43% will, at some point in their remaining years, require long-term care in a nursing home or long-term care facility for an average length of stay of three to four years. One in five will stay more than five years. For a couple over age 65, there is a two out of three chance that at least one spouse will enter a facility at some point.”

In fact, the likelihood and cost of long-term care is one of the biggest financial risks today. For example, accommodation in a long-term care facility can cost between $1,500 and $6,000 per month, depending on the type of facility and the level of government subsidy. Private institutions cost more than government-funded facilities. In-home care can range between $15 and $75 per hour, based on the level of services required, ranging from a full-time, qualified nurse to someone who provides only basic needs.

In reality, not all clients may want LTCI. Some can afford to pay for their care out of their personal savings, while others simply cannot afford the premiums.

One way to find out is to look at the potential financial shortfalls during the discovery phase of the planning process, suggests Geller. Typically, family members or relatives are the primary caregivers. But this usually requires lifestyle adjustments or someone leaving their job to provide care, which ultimately results in a loss of income.

“Baby boomers want the ability to choose the care they receive and do not like to be dictated to,” says Landry. “They want to be clients, not patients.” And this choice can be made possible through LTCI, taking the burden away from family or relatives.

Many of your clients may know someone who needs long-term care. This knowledge facilitates their understanding of the associated costs. “Generations such as ours get caught in between caring for our parents and our children,” says Susan St. Amand, president of Sirius Financial Services in Ottawa. Normally, this is a trigger for client interest in LTCI.

Although most people begin thinking of long-term care when they’re older, LTCI can be acquired as early as age 18, when premiums are lower. Women generally pay higher premiums because they live longer than men, but some insurers have uniform premiums for both genders. The most appropriate target clients for LTCI are those between 55 and 65 years of age.

Your clients will not be required to pass a medical exam prior to obtaining LTCI, but each must complete a detailed health questionnaire, which can result in denial of coverage. Generally, coverage is guaranteed once the premiums are paid, but insurers can change the premiums as they see fit. IE