Continuing Education for Advisors knowledge continuing training educate online awareness participate Long term care insurance An overview
Learning objectives By the end of this course you will be able to: Explain what long-term care (LTC) is, what it includes and the associated costs. Understand how long term care insurance addresses the costs of long-term care. Identify the target market for long term care insurance. Understand how long term care insurance fits in a portfolio of health insurance products. 2
What is long-term care? Long-term care (LTC) can be defined as a varitey of services that address health, social, and personal care needs. When an individual can t care for themself because of deteriorated mental ability, illness, accident, and/or frailty they may need long-term care. Care can be provided at home or in the community, such as an adult day care, or a facility that provides LTC. What LTC may include There are many levels of care that are comprised of tasks that may be provided by trained professionals, family and/or friends including: Nursing care Administering medication and changing dressings Managing pain and symptoms Personal care Washing and bathing, dressing, assisting with eating Helping to move safely into chairs, beds or vehicles Home support Light housekeeping, meal preparation, laundry Helping with shopping trips and appointments Supervision Monitoring activities and making sure safety is maintained Ensuring day-to-day needs are met 3
The cost of facility care The cost for care varies widely by province but typically accommodation costs are at least $2,000 per month for a private room. In some provinces, a cost of $850 per month covers ward level accommodation in a government-subsidized facility. Some private, non-subsidized facilities are more than $4,500 per month for a private room. Waiting lists are long and can be one or two years. Source: Sun Life Financial provincial cost sheets! The cost of LTC The cost of Long Term Care Insurance (LTCI) varies depending on: the level of care required, the amount of care required, and care costs in your community Example 1 Jane female, age 83 Alzheimer s disease Jane has built a sizeable estate and is looking forward to an early retirement. She is also laying the groundwork for an efficient transfer of wealth to her three grown children. Example 2 Steve male, age 53 stroke victim Steve is married and a father of three children ages 10, 14 and 17. After his stroke, he needs 24 hours of daily home care and personal support, which costs $25 per hour. In addition, Steve needs two hours of nursing monthly, which costs $65 per hour. The total monthly cost is $18,135*. *Source: Bayshore Home Health, 2009 4
The invisible cost of providing care There is more to worry about than just the financial consequences of care. If the person needing the care is being treated by a spouse or family member, these other costs are just as painful. Caregiver costs include: Fatigue Mental exhaustion Emotional stress Financial strain Isolation Depression Reduced working hours Limited career advancement 5
The Sun Long Term Care Insurance (LTCI) solution What is LTCI? LTCI provides a weekly income for ongoing care services that address the health, social, and personal care needs of individuals who have lost the ability to care for themselves as defined in the contract. It can be used to help alleviate the costs of ongoing care. Sun Life Financial led the way with our income-style LTCI plan, combining flexibility and simplicity. The benefit can be used for any purpose, including supporting a family caregiver and there s no need to prove the service was given. The money can be spent however one chooses, including purchasing private home care, repaying a friend or family caregiver, or paying for LTC facility costs. Reimbursement products are restricted to expenses defined by the care program and the contract, which means they are also limited to formal care giving (nurse, home agency). Sun Long Term Care Insurance is flexible You can help a client design their own plan. They have three different options: Comprehensive benefit Facility benefit Comprehensive and facility 6
Comprehensive benefit The income benefit is payable if the insured person: is physically dependent (requires assistance from another person to perform two or more of the six activities of daily living bathing, dressing, feeding, toileting, transferring, continence or needs continual supervision because of deteriorated mental ability), is receiving care at home or in a facility, and has met the waiting period. Facility care benefit The income benefit is payable if the insured person: is physically dependent (requires assistance from another person to perform two or more of the six activities of daily living bathing, dressing, feeding, toileting, transferring, continence - or needs continual supervision because of deteriorated mental ability), is receiving care in a long-term care facility, and has met the waiting period. How each benefit type works Comprehensive benefit Provides benefits regardless of the insured s place of residence within Canada or the United States Facility care benefit Paid if care is received in a long-term care facility in Canada - Similar facility in the United States may qualify subject to our approval 7
How do clients benefit from buying both the comprehensive benefit and facility care benefit on Sun Long Term Care Insurance? Purchasing the facility care benefit in addition to the comprehensive benefit may be beneficial to clients in situations where the typical facility care costs in their province are significantly higher than the costs they would expect to pay if they didn t move into a facility. In this case it acts as a top-up because the facility care benefit would be payable in addition to the comprehensive benefit where the insured is physically dependent and residing in a long-term care facility in Canada. A similar facility in the United States may qualify, subject to our approval. The facility care benefit is less expensive than the comprehensive benefit and therefore may allow the client to purchase additional coverage for this specific scenario. If the client selects the comprehensive care benefit there s a zero-day waiting period available with the facility care benefit. If selected and Sun Life is paying the comprehensive care benefit then when the insured person moves into a long-term care facility, there s no waiting period required to qualify for the facility care benefit. The facility care benefit offers our clients options that can help bring added peace of mind. 8
How benefits work together The chart below will help illustrate how the LTCI facility care benefit and comprehensive benefit can work together or on their own during the life of the policy. The client s dependency requiring care at home starts at age 67. The client moves to a long-term care facility at age 82. Scenario A: Client purchases a $600 comprehensive benefit. His dependency started at age 67 and he was cared for at home until age 82 at which point it was necessary for him to move to a long-term care facility. The benefit will be payable until recovery or death regardless of where the client is receiving care. Please see the illustration of this scenario below. Total benefit amount 1200 1000 800 600 400 200 Client s age at beginning of dependency 0 60 65 X 70 75 80 85 90 95 Insured s age Facility Care Comprehensive 9
Scenario B: Client purchases a $600 facility care benefit and he was dependent at age 67. There was no benefit paid as he does not own a plan with comprehensive benefit. He was not living in a long-term care facility but was receiving care at home. At age 82 he moves into a long-term care facility for his care. As long as he remains in a facility, this benefit will be payable until recovery or death. Please see the illustration of this scenario below. Total benefit amount 1200 1000 800 600 400 200 Client s age at beginning of dependency 0 60 65 X 70 75 80 85 90 95 Insured s age Facility Care Comprehensive Scenario C: Client purchases a $600 comprehensive benefit along with a $600 facility care benefit. The comprehensive portion of the benefit is paid at age 67 while the client is being cared for at home. If the client moves to the long-term care facility, the facility care portion of the benefit will be added to the total benefit paid. The total sum of the benefit will equal $1,200. Please see the illustration of this scenario below. Total benefit amount 1200 1000 800 600 400 200 Client s age at beginning of dependency 0 60 65 X 70 75 80 85 90 95 Insured s age Facility Care Comprehensive 10
Understanding dependence To understand how and when LTCI provides protection, it s important to understand the contract s definition of dependence: Always needs substantial physical assistance from another person to safely and completely perform two or more of the six activities of daily living (ADLs) or Needs continual supervision by another person for protection from threats to physical health and safety because of deteriorated mental ability. Deteriorated mental ability is defined as: Loss of short or long-term memory Orientation as it relates to people, place and time Reasoning or judgment as it relates to safety awareness! Activities of daily living are defined as: Bathing Dressing Feeding Toileting Transferring Continence 11
Benefit duration The benefit period options for LTCI are: 100 weeks or 1.9 years 150 weeks or 2.8 years 250 weeks or 4.8 years An unlimited time period The benefit amounts The client can select the dollar amount of the weekly benefit. The minimum weekly benefit amount for each base benefit is $150. So clients can select a $150 weekly amount for the comprehensive benefit and a $150 weekly amount for the facility benefit. The combined weekly maximum amount for both base benefits is $2,000. If the client selects both the comprehensive and facility care benefits, they also need to select a benefit duration period for each. The duration period for each benefit can be the same or different. The waiting period This is the amount of time during which the client must remain dependent before the claim benefit will be paid. Both the comprehensive and facility care benefits have a 30 and 90 day waiting period option. If both benefits are selected, a zero day waiting period can be selected for the facility care benefit. 12
Optional benefits Inflation protection Inflation protection is an often overlooked piece of the LTCI puzzle, but when you re talking about a benefit that may be used decades in the future, it s extremely important. Sun LTCI offers the strongest inflation protection benefit. The benefit increases by two per cent each year with an increase to three per cent while benefits are payable. Increases are compounded annually and there is no cap on increases. Note: The IP rider is the only way to end up with a weekly benefit exceeding the $2,000 weekly benefit. Features Premium payment periods The following two premium payment period options are available. The client pays: Premiums for a limited period the longer of 20 years or until the insured person reaches age 55, or Ongoing premiums for the life of the policy. The limited payment option is attractive for two reasons: The policy is paid for over a relatively short period of time. For example, a 45-year-old person would have their policy paid for by their retirement age. The length of this payment period and the number of times the premiums could increase is minimized. 13
Spousal waiver benefits Our unique spousal waiver benefit is favoured by clients. Once two policies have been independently in-force and without claim for ten years (or both spouses have reached age 86), if one spouse goes on claim, the other spouse s premiums are waived, and continue to be waived even if the claiming spouse s benefit period expires. If one spouse dies, whether or not they were on claim at the time, the other spouse s premiums are also waived. Note: - At the time of claim, the spouse needs to tell us that they qualify to have the premiums waived. - Review the policy pages for the definition of spouse. - If the policies are not purchased in the same year and one spouse goes on claim before both policies have met the ten year requirement, the spousal waiver is not applicable. Extended term insurance (ETI) ETI is unique temporary insurance that accumulates in the form of a limited duration paid-up option. If the client is unable to make premium payments, policy provisions may allow an extension of benefits. During the extended term, the benefit amount, benefit period and waiting period do not change. The availability and length of the ETI provision varies based on the following factors: Base benefit type (comprehensive or facility care) Age at purchase Gender Premium payment period Number of years the policy has been in force 14
The illustration and the policy outline how long each base benefit will remain in force following the unpaid premium due date. While comprehensive or facility care benefits continue in effect under the extended term insurance provision, we do not change the weekly benefit amounts, benefit periods or waiting periods. Premiums are not payable while the ETI provision is in effect. While the policy is continued under the ETI provision, we will not: pay a return of premium on death benefit, or make any further inflation protection increases. Note: - The policy ends when the ETI ends. - If the policy owner wants to reverse the ETI or put the policy back into effect if it has been ended for non-payment of premiums, they must do so within two years of the date they stopped paying premiums, while the insured is still alive. Evidence of insurability will be required and unpaid premiums must be paid plus interest and administration fees. Premium guarantee Our LTCI product is a level premium product, so there are no scheduled premium increases after five years. However, it is true that we have the right to adjust premiums after five years. LTCI is still a relatively new product and it is possible that future claims experience could take an unexpected turn. That s why neither insurers nor reinsurers are able to fully guarantee their premiums at this time. 15
Having said this, we have used the best data available when setting our rates because we too want to avoid substantial rate increases. While small increases may be required at times, drastic increases are difficult for both clients and for the insurer. A decision to substantially increase premiums would not be taken lightly since we know that such a decision could: make the product less competitive, damage consumer confidence in the value of the product, cause healthy clients to leave for a competitor s product (if they can afford it), worsening our future claims experience. It is also important to note that any premium changes would be based on the insured person s age at the time the policy was issued. The insured person s health or ability to function independently at the time of the premium change will not be considered in determining the new premium. Note: to manage this risk, a client could consider the 20 year limited payment option and limit their exposure to increases. B-A-S-I-C reasons to buy LTCI: Burden don t want to burden family or friends Access to quality care in setting of choice Savings want to protect their savings and assets Independence control over their own care Confidence lack of future government assistance to cover the cost of future premiums. 16
LTCI primary target market : Ages 50 to 65 with annual household income of $75,000+ Clients in this profile: recognize the need for LTC planning, understand that it is becoming a more pressing issue, and are more likely to be insurable. Further defining the LTCI target market: Women: Married couples: Single people: Health care professionals: Small/family business owners: More in tune with the need Often called on to provide hands-on personal care Spouse will need support with care giving Spouse may need care once widowed No spouse or children to provide care Everyday experience Preservation of business inc. 17
CII DI LTCI Comparing living benefits While critical illness insurance (CII), LTCI and disability insurance (DI) each provide unique solutions for those facing a health crisis, an overlap in coverage can exist. For example, illnesses like cancer, Alzheimer s disease, Parkinson s disease, paralysis and multiple sclerosis may trigger a benefit payout from CII, LTCI and DI. It s because of this overlap that some find it difficult to determine which benefit or benefits are best suited to their current and future needs. What is each product designed to cover? CII DI LTCI Expenses related to recovering from a serious illness Costs related to treatment, modifications to home or vehicle, time off work for spouse, etc. Lost income due to a disability Replaces a portion of pre-disability earnings Often about two-thirds Cost of care Need help getting out of bed, dressing, or eating over a lengthy period Need for 24 hour supervision due to dementia How do we assess the risk? CII DI LTCI Risk of developing one of a group of serious illnesses Heart attack, stroke, cancer, etc. Sun CII offers coverage for 24 illnesses Risk of being unable to work as a result of sickness or injury Risk of becoming physically dependent on another person for daily assistance Due to cognitive impairment or loss of ability to perform activities of daily living (ADLs) 18
What is the benefit trigger? CII DI LTCI Diagnosed with a condition covered under the policy Must meet a survival period Depends on the contract definition own occupation regular occupation, or any occupation Must meet a waiting period Inability to perform two or more ADLs or needs continual supervision due to a deterioration in mental abilities Must meet a waiting period How is the benefit paid? CII DI LTCI One-time lump sum cash payment Policy ends once a payment is made for a fully covered condition Payments calculated as a percentage of pre-disability income at time of issue Payment continues for the duration of disability, up to expiry age (usually age 65) Depends on the plan design Some reimburse approved expenses up to a defined maximum Others pay an income based on the amount of coverage purchased Payments continue while eligible for claim and for coverage duration of daily living (ADLs) 19
The ideal product fit Working years Retirement years Long-term care insurance Critical illness insurance Disability insurance Personal health insurance Income protection Retirement income protection 25 30 40 55 65 75 85 95 If you have earnings to protect, DI is a must to consider. DI is designed to replace a portion of your income while you are earning an income (in other words during your working years). The use for DI diminishes if you are retired. CII can bridge the gap between day-to-day living expenses that are covered under a disability plan and additional expenses that are incurred due to a serious medical condition. Because CI is not about replacing income for day-to-day expenses (like DI) it is valuable coverage whether you are actively working or retired. The lump sum benefit can be used for a variety of costs associated with a CI before and after retirement. CII is available for children and adults, not just those in their working years. LTCI provides an income when you re not able to care for yourself. Together, LTCI and CII can provide umbrella protection. Where CII provides a lump sum payment to help with recovery, LTCI is better suited for illnesses requiring a lengthy period of care. Since disability coverage ends at retirement, LTCI is an important piece of retirement planning because it ensures that you have the financial means to pay the additional costs (whether before or after retirement) associated with LTC. LTCI should be considered prior to retirement, when premiums are lower and health is still good. CII, DI and LTCI address distinct risks and needs that clients are susceptible to. Providing them with a combination of CII, DI and LTCI solutions will help ensure they receive optimal coverage when facing a health-related issue. 20
Why partner? 1. Brand, strength and integrity 2. Competitively designed and priced products 3. Sales strategy tools 4. Expert accessible underwriting 5. Regional support 6. VIP treatment via Strategic Partner Program www.sunlife.ca/advisor Visit us around the clock to check out our broad range of tools and support services, including our proprietary sales concepts, Finanical Advisor bulletins, case studies, needs analysis software and full product guides. Want to know more? If you already work you can contact your regional distribution office to arrange for face-to-face case assistance, or consultation on advanced tax estate planning issues. Call 1 800 800-4SUN/4786 option 5. If you don t currently work call 1 800 800 4SUN/4786 option 3, 1 to inquire about contracting. knowledge continuing training educate online awareness participate Sun Life Assurance Company of Canada, 2011.