Did you know that your chances of living to 100 years old are now better than ever?  Living a long and fruitful life may be seen as a great gift.

However, the chances that a 65-year-old will require long term care at some point in life are 49 percent for men and 65 percent for women.  Even so, according to the Canadian Life and Health Insurance Association, 74 percent of Canadians have no financial plan in place to pay for long term care.

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Active, middle class seniors with moderate nest eggs can usually afford decent levels of care at home or in a retirement residence.  As they need more assistance, and costs for in-home care become more expensive, a nursing home may be more appropriate.

The problem is you don’t know how much care, if any, you’ll need, how long you’ll need it, or when.

What are the costs?

Current costs of care in long-term facilities can easily exceed $5,000 per month.

Personal home care ranges from $12 to $90 an hour.

Independent living costs about $2,200 to $5,000 per month for a small apartment with meals and living costs included.

Should you save up, or insure?

Many seniors who need specialized health care typically pay for it with their own savings or home equity.  Do you have the financial resources to pay for the cost?  Determine how long your assets would last.

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Long term care insurance can relieve the financial burden on your family by providing the coverage you may need.

What is long term care insurance?

Long term care insurance is a relatively new offering that is designed to cover these expenses.  Services can be provided at home, in a retirement home, assisted living, or long-term care facility.

Policies vary widely.  Typically, benefits are paid if you reach a defined level of mental incapacity, or you become unable to care for yourself due to chronic illness or disability, or unable to perform two or more activities of daily living, and/or require continued supervision due to cognitive impairment.

Some plans reimburse you for eligible expenses such as stays in nursing homes or private nursing care – up to a pre-set maximum.

An income plan gives you a monthly payment that can cover any type of service such as a caregiver in your own home – even a relative.

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See how the policy can be tailored to your individual needs.

When should you apply?

Based on your family history you may feel there is a large possibility that you will need some sort of long-term care.  Or, you may be the type who frets about future high costs and how much the government will subsidize your care.

The younger you are, the cheaper the premiums will be.  A common starting age is in the late 40’s or 50’s.  The state of your health will also determine your rate, so signing up before you have any medical conditions will save you money and ensure you qualify.

At some companies such as Manulife Financial, you are guaranteed renewal for life regardless of changes in health.  The policy won’t be cancelled as long as the premiums are paid.

Some insurance policies will return all your premiums if no claims are made.

What about government paid care?

Each province has basic care in its long-term care or residential care system.  You’ll always be able to get care somewhere, but it only ensures the basics.   Some disadvantages are the long waiting lists and you can’t count on getting into your first choice of residence.

Certain services such as rehabilitation and therapy may not be covered by provincial plans.  You need to pay a “companion” yourself for supplemental care that provides extra help.

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Final thoughts

Which strategy should you use to fund your final years?  Save or insure?

Long-term care insurance coverage has a number of benefits but paying large insurance premiums comes at a cost.  It may mean less savings, or not being able to enjoy your favorite activities in retirement.

Many people use their savings, put some money into annuities, and use their home equity as a financial reserve.  Some government support is available based on income.

Take the time to think about long-term care when you prepare your retirement income plan.

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