The one tax deduction worth fighting for

Advisors are threatening to make greater access to an important but undersold insurance policy their campaign issue

Down in the U.S. individuals are allowed to write off their long-term-care premiums making the product far less expensive, and the suggestion is they should be allowed to do the same here in Canada.

“We’re so bad here in Canada that we don’t even give premium tax breaks,” Karen Henderson, an advisor with expertise in long-term care coverage, recently told LHP. “Allow Canadians to have their own health savings accounts or give them a break on interest rates. There are many things they [government] could do but they’re not doing anything.”

But the impact government tax changes can have was demonstrated by its move to lift the ceiling on TFSA contributions.

Earlier this year the annual contribution limit for the TFSA was increased to $10,000. Almost doubling the amount Canadians could contribute to the tax-deferred investment vehicle, the federal government spoke glowingly about the positive effect the move would have for retirement savings.

While it might be true for the 1%, it does little for those struggling to meet their financial obligations.  

In recent weeks LHP’s discussed the pros and cons of long-term care insurance in Canada.

The general consensus is that while needed by many it’s just too darn expensive. After the mortgage, groceries, university and the kids’ activities are paid for, there’s very little left for insurance – especially LTC.

“Long-term care insurance is definitely gaining traction,” said Assante Financial Management advisor Glen Rankin who was speaking to this as part of a bigger discussion about planning horizons. “The problem is it’s misunderstood and undersold.”

And, as he reminds LHP, it’s got a really long sales cycle making it difficult for anyone to sell who isn’t totally committed to the product and that in turn hurts the growth prospects of this type of insurance.

When you consider people’s increased longevity these days, providing an incentive to purchase this product could be the difference between Canadians having enough to live on in their old age… or not.

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