Long Term Care Insurance

Long term care is an insurance policy that provides you with the peace of mind that should you be physically and/or mentally incapacitated at some point in life, that you will be entitled to help with care costs.

People may decide to choose long term care if their current earnings and/or savings place them within a financial standing that would reduce their entitlement to government funded care.

What is Long Term Care Insurance?

High risk long term care couple

Long term care can be arranged through a number of different avenues. People may decide to choose these options if their current earnings and/or savings place them within a financial standing that would reduce their entitlement to government funded care. In general you can choose to receive aid with your living requirements at home, or in a residential or nursing home.

  • Immediate needs (care fee) annuities - In order to qualify for this plan you must be assessed by a medical practitioner approved by the insurer to have reached a certain level of care needs. For this plan you will be required to pay a one-off lump sum payment to the insurer which will be used in part to pay for your care through a regular income paid to you or your care giver.
  • Enhanced annuities - Also referred to as Impaired Life Annuities, allow you to sell your pension pot to an annuity provider who will then use these funds to provide you with a regular monthly income. In order to qualify for this cover you will generally need to have health factors that place you in a higher risk category for early death such as being overweight, a smoker or having a serious health condition.
  • Equity release plans - This type of plan allows you to free up the cash locked within your assets e.g. home, in the form of a loan to pay for your care needs. The plan is available as a lifetime mortgage arrangement where part of the value of your home is given to you as a loan to pay for your care, the loan and interest is them repaid upon the sale of the property. Alternatively you can opt for a home reversion plan where you sell all or part of the rights of your property to a reversion company who then allow you to stay in the property during your care, the company will then collect their portion of the value of the property upon its sale.
  • Savings and Investments - These can come in many forms such as premium bonds, ISAs, investment bonds and property portfolios. By planning your potential future care needs this way you can establish the amount of money that you will have put aside for any help that you may need in the future.

How will my Special Risk affect this?

Some long term care plans can only be set up on the proviso that your health is already in a state of deterioration. So for some, having a special medical risk can be an advantage when setting these policies up as they will make you eligible for cover. However, it must be clear that serious conditions will probably result in a higher financial outlay to start the policy.

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