Long term care insurance provides the financial support you need if you have to pay for care assistance for yourself or a loved one. Long term care insurance can cover the cost of assistance for those who need help to perform the basic activities of daily life such as getting out of bed, dressing, washing and going to the toilet.
You can receive long term care in your own home or in residential or nursing homes. Regardless of where you receive care, paying for care in old age is a growing issue.
How it works
Government state benefits can provide some help, but may not be enough or may not pay for the full cost of long term care.
The level of state support you receive can be different depending on whether you live in England, Wales, Scotland or Northern Ireland.
In England and Wales, for example, you can also receive means-tested state assistance, which depends on your savings and assets. For instance, if your savings and assets are above £23,250 in England you will normally be expected to pay for the full cost of long term care yourself.
The UK Government is currently changing how long term care is funded. Some of the detail has yet to be decided, but the Government has said that all changes are expected to be in place in England by April 2016. The changes are based on the recommendations of the 2011 Dilnot Commission on Funding of Care and Support.
Types of long term care plans
- immediate needs annuities
pay a guaranteed income for life to help cover the cost of care fees in exchange for a one-off lump sum payment, if you have care needs now
- pre-funded care plans
gave you the option of insuring your future care needs before they develop (these plans are no longer available to purchase)
- enhanced annuities - you can use your pension to buy an enhanced annuity (also known as an impaired life annuity) if you have a health problem, a long-term illness, if you are overweight or if you smoke. Annuity providers use full medical underwriting to get a more accurate individual price. People with medical conditions including Parkinson’s disease and multiple sclerosis, or those who have had a major organ transplant are likely to be eligible for an enhanced annuity
- equity release plans - give you the ability to get a cash lump sum as a loan secured on your home – these can be used if you are looking to fund a care plan now or in the near future
- savings and investments - give you the opportunity to plan ahead and ensure your savings and assets are in place for your care needs
If you are already retired, or nearing retirement, it makes good sense to take advice to ensure that your affairs are in order – for example, arranging your will or a power of attorney. It also makes sense to ensure your savings, investments and other assets are in order in case you or your partner may need long term care in the future.
If you are of working age, you are in the best position to plan for your future care needs. One in three people will require care so the chances are one of them could be you. Saving while you earn through investment or savings plans such as deposit accounts, ISAs, national savings accounts and your pension will help with the cost of long term care in later life.
When planning for your future care needs think about:
- who (in your family) most needs long term care and for how long
- whether you need a care plan now
- whether you should be planning ahead for yourself or a loved one
- whether you have the money to pay for long term care
- how long you might need to pay for a care plan
- whether home care or a nursing home is required
- what kinds of things would be required of the help. For example, help with dressing, using the toilet, feeding or mobility
- whether you find that your home requires additional features such as a stair lift, an opening and closing bath or a bath chair, and / or home help
Is long term care insurance for you?
Many people who require long term care are suffering from an illness and find themselves unable to perform everyday tasks due to frailty or disability.
Some reasons for taking out long term care insurance include:
- having dementia such as Alzheimer's disease or pre-senile dementia
- contracting Parkinson's disease or motor neurone disease
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