Our elderly used to be cared for by their children or other family members.  But now increasing numbers of our older generations are requiring long term care, whether in assisted living residences or nursing homes.  Statistically the chances of needing long term care will only rise, in part because we’re living longer, especially women.  A typical facility will have women as more than half their residents.

Long term care is not only hard on the emotions, it can be devastating in terms of finances.  Good care can easily cost $30,000 to $50,000 a year or more.  Who knows what the costs will be in 10 or 20 years from now.  It’s easy to see that long term care can wipe out an estate pretty quickly.

The good news is that this financial drain can be avoided with long term care insurance, which covers some or all of the expenses incurred.   This type of insurance is relatively new but the number of policies purchased has increased dramatically.  It is also used by more than one-third of those who purchase it.  In fact, if you buy long term care insurance and end up needing this kind of care, it’s possible that the total of all your payments would be less than the cost of only a year in a nursing home.  And if you never have to use it?  Consider yourself lucky.

Consider Personal Circumstances

You are the best judge of whether or not the cost is worth it.  Generally, you don’t need to consider long term care insurance until you are around 50-years of age unless a family medical history or personal circumstances makes you decide otherwise.   If your parents required long term care, or debilitating diseases such as Alzheimer’s run in your family you may be more inclined to consider it.

Do you have other alternatives?  If your assets are quite high (over $1 million) you may conclude that you could handle the costs yourself.

What Does It Cover?

People think their health care or CPP will cover the costs of long term care.  The truth is that the government pays for very limited, basic care and the costs are usually based on income.  For example, the Alberta Seniors Benefit is a maximum of $8,880 per year.  Everyone has heard of the neglect and poor medical care in government facilities and I don’t think it is much exaggerated.

What Does It Cost?

Long term care insurance can be fairly reasonable.  There are two things you can do to improve your chances of getting a decent policy.  First, premiums are based on how old you are when you purchase your policy, so apply while you are relatively young (50 or so).  You will also be more likely to be in good health at a younger age.

Secondly, the costs can vary tremendously, so comparison shopping is very important.  Be sure you are comparing policies with the same benefits.  Be sure you understand the variables such as the amount of daily coverage, what is not covered and how long the policy will cover you.  You want adequate coverage that will keep pace with inflation.

Make sure the fine print doesn’t contain restrictions that can cancel out significant benefits.  Pay close attention.  Make sure the insurance company has a good track record and that it’s going to be there when you need it (which may be 20 years from now).

This isn’t just a financial issue.  Sometimes the peace of mind you get from having long term care insurance may be more than worth the premiums you pay.

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