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Immediate needs annuities

Immediate needs annuities are a type of annuity, also known as immediate care plans or care fees annuities, that pay out a guaranteed income for life to help cover the cost of your care fees in exchange for a one-off lump sum payment.

Payments can be set to pay a level benefit, or can be index linked to raise over time. You can use whatever money or assets you may have left over after taking out the immediate care plan for any purpose – for example, if you wanted to leave it to your family.

Immediate needs annuities offer

  • the ability to have care in your own home, or in a residential or nursing home
  • a payout until you no longer require care, which is usually when you die
  • the option to have your payment given directly to a care home, carer, or to you as the policyholder

How it works

You must be medically assessed as needing care to apply for this type of care plan, and for the insurer to evaluate how much you must pay for your chosen level of income.

You cannot normally cancel or get your lump sum premium back, except during the statutory cooling-off period (check with your insurer about how long this period will be) after purchase.

  • If you die earlier than expected your family will not get any money back, but some policies do offer an option to safeguard the capital in the event of early death
  • If you die later than expected, the insurer will pay out an income until your death
  • When you die, unless the policy offers a death benefit, there is no payout to your estate

You can also buy a deferred care plan for long term care. Instead of paying out benefits immediately, this pays out after a few months or years.

With a deferred care plan, you can agree a fixed period of time for your care. For example if you will need care for a few months or few years, but you will also have some protection if your care needs go beyond the agreed fixed period of time (you will have to agree this extra period of time with your insurer). A deferred care plan is usually cheaper than an immediate care plan.

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