Long term care insurance

Q. - If your parent or spouse is already in need of care, what can be done to help minimize the care consuming all their life’s savings?

A. - An Immediate Needs Long Term Care Insurance.

Long Term Care Insurance plans are aimed at providing ongoing income for the rest of your life once a need for care arises. The income they pay out, can be used to provide the quality of care and support you want, initially in your own home, and/or in a formal care home. The main benefit of Long Term Care Insurance (also known as immediate needs annuity) is that once purchased, they will carry on paying the insured amount for however long term care is needed, instead of you or your relatives having to guess the length of care needed and trying to manage your money accordingly. In comparison should you start to self-fund, due to any cost of care received or poor investment returns, it can soon become impossible to back track and find sufficient money to purchase a Long Term Care insurance at a later date.

Immediate Needs Annuities – These plans are designed to help fund care for those who already need it because they have become mentally impaired or alternatively fail at least one Activity of Daily Living- (Washing yourself, feeding yourself, continence, being able to transfer from bed to chair, dress yourself). In return for paying the provider a single lump sum, the person in need of care (or their personal representatives) will receive a guaranteed income for the rest of their life thus ensuring continued care. As such they are like purchased life annuities, but with two distinct differences

• First, each plan is individually underwritten;
• Second unlike an ordinary annuity the payments received from the provider are paid free of tax so long as they are paid to a recognised care provider.

Therefore the purchase cost of these Immediate Needs Annuities are, pound for pound, less than would be available from an ordinary annuity. The amount of premium required will depend upon the age, sex and health of the patient – the worse it is the cheaper the premium will be as life expectancy and therefore the expected term is lower.

To look at the relative advantages and disadvantages of such annuities click here.