The Aging Population and the Rising Cost of Care in Canada
Canada is experiencing a demographic shift that is reshaping the country’s social and economic landscape. According to Statistics Canada, the average age of a Canadian in 2024 was 41.6 years, and by 2030, one in four Canadians will be 65 or older. This aging population is driving an increasing demand for health services and long-term care solutions.
The cost of long-term care (LTC) can be substantial. A basic space in an LTC home starts at around $2,000 per month, while private homes can cost up to $15,000 monthly. Many Canadians prefer to age in their own homes, but financial planning for this option is often lacking. An Ipsos poll for HomeEquity Bank found that 90% of respondents would choose at-home care, yet only 13% have made plans for it.
The Financial Burden of In-Home Care
In-home care comes with its own set of costs. Personal support workers (PSWs) in Ontario charge between $28 and $35 per hour, while registered nurses can cost between $45 and $80 hourly. Physiotherapists may charge as much as $90 to $150 per hour. Additional expenses include home modifications, such as installing ramps or grab bars, and purchasing mobility aids like wheelchairs or walkers. There are also ongoing costs for housekeeping, transportation, and other services that help maintain independence.
While government benefits provide some coverage, they often fall short of covering all necessary expenses. This has led many Canadians to explore alternative options for financing their future care needs.
Long-Term Care Insurance: An Overview
Long-term care insurance is designed to cover the costs associated with aging. It is an insurance policy purchased from a provider, where individuals pay premiums when they are healthy and working. The goal is to ensure that future health costs are covered when needed.
Michael Van Alphen, vice-president, insurance solutions, at Sun Life, explains that long-term care insurance is not just for elderly individuals with health issues. It provides a weekly benefit that helps cover the costs of care required when someone becomes elderly.
Sun Life offers a specific plan called Sun Life Retirement Health Assist, while another company, MyDignity, provides a similar option. These are among the few insurers offering this type of coverage in Canada.
How Long-Term Care Insurance Works
The payout of long-term care insurance is typically triggered when the policyholder can no longer perform two of six key activities, such as bathing, dressing, toileting, or feeding themselves. Other triggers include the inability to move without assistance or being incontinent. Some plans may have caps on the payments.
Cost of Long-Term Care Insurance
The cost of long-term care insurance has evolved over time. Older policies had shorter waiting periods, leading to higher premiums. However, current plans usually have a one- to two-year waiting period before payouts begin, resulting in lower annual premiums ranging from $1,000 to $2,000. If the policyholder dies before accessing the funds, the premiums are returned to the beneficiary.
Pros and Cons of Long-Term Care Insurance
Pros:
– Covers most of the services you may need.
– Provides guaranteed payments for your lifespan, depending on the plan.
Cons:
– Expensive premiums.
– Longer wait times to access payments.
– Some plans have capped costs.
Alternative Options for Financing Care
Reverse Mortgages
Another option for funding long-term care is a reverse mortgage. This allows homeowners aged 55 and older to borrow against the value of their home, receiving a lump sum or monthly payments. The funds can be used to cover in-home care costs without requiring the homeowner to move or sell their property.
Niary Toodakian, vice-president, brand and public relations, at HomeEquity Bank, notes that reverse mortgages can be particularly useful for covering personal support worker costs, age technology solutions, and home retrofitting—expenses that often fall outside government-assisted health-care programs.
Pros:
– Provides a lump sum of money when needed.
Cons:
– You or your beneficiary must repay the amount borrowed plus interest when selling the home, moving out, or dying.
– May not provide as much support as downsizing.
Personal Savings
Saving for health-care costs early is another viable option. Individuals can build a health-care savings plan into their financial strategy, redirecting funds from paying off debts like mortgages or student loans into retirement accounts such as RRSPs or TFSAs.
If moving into a long-term care facility is necessary and there is no surviving spouse, selling the home could help cover part of the costs.
Pros:
– You have full control over how your money is used.
Cons:
– You may not save enough.
– Risk of financial abuse if proper power of attorney arrangements are not in place.
Making the Right Choice
Whatever option you choose, consulting with a financial advisor is crucial. They can help determine what you can afford, what kind of care you want, and where you’d prefer to live. This ensures that you make informed decisions about your future and continue living comfortably as you age.