Bill and Sophie are 68 and 64 years old. Up until a few months ago, they enjoyed a very active lifestyle which included lots of travel, participation in various sports and a very busy social schedule between their children, grandchildren and friends.

Less than a year ago, they had made the decision to retire so that they could pursue more of their travel dreams as well as spend more time with their grandchildren. They had budgeted that between the two of them and their modest pensions, with no mortgage or other liabilities, that they could comfortably support their lifestyle as well as their desired standard of living.

What they hadn't anticipated was that within 6 months of Bill's retirement, he would suffer a stroke that required 4-6 months of intensive rehabilitative care at both an in patient and then out patient facility. Following his discharge, Sophie found that she could not undertake all of the caregiving duties on her own and had to find home care service providers to help her out - both physically and emotionally.

The additional cost of providing this care and in modifying the home in order to accommodate Bill's new physical needs, placed a huge burden on their financial resources forcing them to consider getting a reverse mortgage in order to pull some money out of the equity in their home.

The problem with this decision was that over the course of time assuming that the market value of the home stayed the same, there would be very little equity left. This was very disappointing for Sophie and Bill as they had hoped that their children and grandchildren would benefit from the equity in their home after they passed.

(Many adult children actually choose to fund this type of insurance on behalf of their parents rather than their parents taking equity out of their house.)

Situations like this remind me how incredibly important long term care and critical illness insurance coverage are. Long term care insurance pays a monthly benefit which is paid to the insured over a selected benefit period and can be used towards the cost of either caregiver assistance or institutional care and other related medical expenses such as physiotherapy and occupational therapy.

Critical illness insurance is a lump sum benefit which is payable to the insured once the person has survived 30 days from the initial diagnosis of the covered condition. In Bill's case, he would have received a lump sum benefit (as stroke is one of the covered conditions) as well as ongoing monthly benefit payments.