If you or a relative require long term care, one of the biggest concerns can be the costs. Residential care, in particular, can be incredibly expensive and a real burden on your finances. With a long term care annuity you can effectively cap the cost of long term care.
As people age and their physical or mental health deteriorates, some will need to call on others to help them perform the everyday activities of life such as getting washed and dressed or preparing and eating meals. Rather than depending on the state or family and friends to assist, it is possible to establish LTCI which can contribute towards the costs of the provision of care in the person’s home or in a residential or nursing home.
As a rule of thumb, most LTCI policies will cover only some of the cost of care – the balance coming from the person’s income and any state benefits they may be entitled to. Furthermore, being in receipt of LTCI benefits can affect the amount that can be claimed in means-tested state benefits. If the person requiring care has savings or assets (such as a home) which they don’t want to give up to help pay for care, LTCI can help preserve those assets.
Most LTCI policies will not usually cover temporary needs, such as care after an operation. Health problems brought on by alcohol or drug abuse, attempted suicide, or issues relating to HIV or AIDS are also not likely to be covered. Other exclusions apply to mental conditions such as depression and schizophrenia.
There are two types of LTCI policies: ‘immediate’ LTCI which is bought at the point care is required, or ‘pre-funded’ LTCI which is purchased in advance of care being needed.
Immediate LTCI can be bought when the person concerned has been medically assessed as needing care. In return for a lump sum, an immediate care plan will provide a regular and tax free income for life, which helps pay for the care required. The cost of an immediate care plan is determined by the amount of income required, whether that income is fixed or not and the age, sex and state of health of the person requiring the care. (If the person should die whilst in care, the income from the plan usually stops and the capital within it is not repaid, unless the plan provides death benefit.)
Pre-funded long-term care insurance can be bought at any age: the premium will depend on the person’s age, sex and the amount of cover specified. The policyholder pays premiums either monthly or annually, or in the form of a ‘one off’ premium. The plan will be reviewed every so often by the insurance company at which time the premiums may rise – or the one off premium may need to be topped up.
If no claim for care is ever made, the policyholder may not get any money back unless the policy is investment-linked, in which case the balance within the investment fund may be returned. What that might amount to will depend on the fund’s investment performance and by how much the insurance premiums have reduced the fund’s value. Some insurance policies will pay out a lump sum if the policyholder dies within the first few years of taking out the policy without actually claiming on it.
Why Consider a Care Fees Annuity?
With a care fees annuity, you essentially cap the cost of your ongoing care. You can rest assured that, for a lump sum, your care fees will be met for as long as is required. This is particularly useful for those who are likely to require care for the rest of their lives.
You can purchase a care fees annuity (also known as an ‘immediate needs annuity’) whereby, in exchange for a lump sum, the cost of your ongoing care will be met by the provider.
Care Fees Planning
Get help and care advice from our expert care fees planning advisers. The choice of staying at home for care or going into a nursing home and the fees required can all be discussed with you and your family.
Care fees planning can be very complex and it is best to seek the help and guidance of expert financial and legal advice, we can help here with our links with specialist legal firms that also specialise in care fees planning. Our recommendations are provided after we have researched the entire market for the most suitable care fees plan for your individual needs and requirements.