A new study reveals that the prevalence of dementia in Canada is expected to double in 30 years, which will drive up demand for long-term care tenfold.

With hefty costs associated with such care, financial advisors have a key role to play in helping clients prepare for the possibility of the disease affecting someone in their family.

Dementia, which refers to a large class of disorders characterized by the progressive deterioration of thinking ability and memory, has become an epidemic in Canada, according to the study Rising Tide: The Impact of Dementia on Canadian Society. The report, commissioned by the Alzheimer Society of Canada, estimates that 500,000 Canadians — or 1.5% of the population — currently have dementia. It is the most significant cause of disability among Canadians over the age of 65.

By 2038, the report forecasts that 1.13 million people, or 2.8% of the Canadian population, will have dementia, driving up demand for long-term care tenfold.

The cost of long-term care ranges from approximately $4,000 to $10,000 per month, according to Mark Halpern, certified financial planner and president of illnessPROTECTION.com in north Toronto. He says most of his clients are unaware of these costs, and many assume that they will be covered by the government. As a result, he says it’s critical for financial advisors to inform clients of the need to prepare.

“Advisors really do have a responsibility to put this on the table,” says Halpern. “In being the trusted advisor to our clients, we have to show them the whole landscape of what their risks are.”

John Parker, assistant vice president, product and marketing, living benefits at Manulife Financial Corp., agrees that there is a lack of awareness around the financial impacts of serious illnesses.

“Dementia is one of those health risks that people need to be aware of and potentially prepare for in terms of financial costs,” he says.

Inform clients of insurance options

Living benefits insurance products such as critical illness insurance and long-term care insurance can help clients prepare for the possibility of getting ill. Long-term care insurance plans provide for those who need supervision or assistance with daily living activities due to a chronic illness, disabling condition or cognitive impairment. They generally reimburse, up to a limit, the expenses incurred for nursing home or home health care; or they pay a pre-determined benefit amount on a daily or monthly basis.

In contrast, critical illness insurance provides a lump-sum payment if an individual becomes seriously ill. Many critical illness policies also feature a long-term care component.

Parker urges advisors to familiarize themselves with all the options.

“Advisors need to take some time to understand not only the products, but also the opportunities for the products — how they fit in,” he says. “Then be able to have conversations with their clients around it.”

These types of insurance are not ideal for all clients, Parker warns. Eligibility typically depends on a client’s age and health, and suitability of the products depends on such factors as the benefits available through a client’s existing insurance policies, marital status, life expectancy, and total assets.

Halpern notes that long-term care insurance is typically unnecessary for very wealthy clients, since they can often afford care without it. Beyond this group, anyone who can afford the policy should give it serious consideration, he says.

“For a small premium,” he says, “it’s a way to provide piece of mind to know that the future is looked after.”

Even young clients should be considering living benefits policies, Halpern says. He points out that the younger and healthier a client is, the more affordable the policy will be.

In approaching the topic with clients, Halpern says advisors need to be straightforward and direct. He suggests asking questions such as: “What would you like to see happen when you get sick? What would you like to see happen when you can’t perform active daily living activities or you have dementia?”

It’s also important to remind clients that the cost of care can vary drastically depending on the type of care desired, or required. For example, private accommodation in a nursing home can be significantly more expensive than semi-private, and private home care costs range widely depending on the services required.

IE