Long-term care (LTC) insurance pays benefits when the insured is unable to perform a specified number of activities of daily living (ADLs) without assistance, or when severe cognitive impairment requires supervision. LTC benefits fund professional care at home, in an assisted-living facility, or in a long-term care facility (nursing home).
The six standard ADLs used in Canadian LTC policies are:
- Bathing
- Dressing
- Toileting
- Transferring (moving from bed to chair)
- Continence (bladder and bowel management)
- Eating
A policy typically triggers benefits when the insured cannot perform two or more of the six ADLs without substantial assistance, or experiences severe cognitive impairment. The insured must satisfy an elimination period (often 90 days) before benefits begin.
Benefit design: LTC benefits are typically a flat daily or monthly dollar amount, not a percentage of prior income. The client must estimate future care costs (which vary by province and type of facility) and select coverage accordingly.
The government gap: provincial public long-term care programs are means-tested and waitlisted. They do not guarantee access to private rooms or preferred facilities. Private LTC insurance funds the difference between government contributions and actual care costs.
Inflation protection: because LTC care costs are likely to rise over time and many purchasers buy coverage decades before they need it, inflation protection riders (typically 3 to 5 percent compound annual increases) are important to consider.