What is long term care?
Long term care is the care and support that you may need in later life due to frailty or disability. You can receive long term care in your own home, or in residential or nursing homes.
Why do I need to prepare for it?
Due to increasing life expectancy, paying for care in old age is a growing issue for many people.
Currently about 20% of men and 30% of women will require long term care at some point in their lives. Most people do not plan for needing such care.
The costs involved can be daunting. The average cost of care in:
- a residential home in the UK is approaching £25,000 a year
- a nursing home, if nursing care is also required, this cost rises to nearly £39,000 a year.
In many cases the costs can be more than double these amounts.
Source: Association of British Insurers October 2010
What help can you receive to help pay for long term care?
The Government does provide some State assistance to help with the costs. However, this assistance is means-tested and you will be assessed on what personal savings, property and other assets you may own. Once this assessment is done, you will be told whether or not you qualify for state support.
In many cases, people do not qualify for enough support to cover the full cost of the care they need.
What insurance solutions are available to help you cover the costs of long term care?
If you don’t qualify for state support and the retirement income you receive falls short of the cost, the insurance industry offers a range of financial products to help you fund your long term care needs.
It is difficult to assess how long you will need care for, and therefore difficult to ascertain the cost. The national average stay in a residential care home is two years, but research has shown that people who self-fund can live an average of four years in a care home (Source: Bupa Care Services January 2011).
It is important to note that paying for care can be expensive, and in some cases people run out of money whilst still needing care. In this case the Government will take over your long term care needs, although your situation may change due to the constraints of Government funding. For example, you may have to be moved to another residential or nursing home.
The following insurance products give an idea of the alternative options for funding long term care:
• Immediate Care Plans – These pay a guaranteed income for life to help cover the cost of your care fees in exchange for a one-off lump sum payment.
• Long Term Care Bonds – A pre-funded long term care product that provides a specified income in the event of needing care. If care is not required then a surrender value may be available.
• Equity Release Plans * – If you own your home, you can secure a loan against your property to release some of its value. The loan can then be used to help pay for care – either for yourself or for a relative needing care. The amount you can borrow will depend on your age and the value of the property. Interest is added to the loan on a monthly basis, and the outstanding balance is repaid when the property is sold or when the person in care passes away. Please note that we do not provide advice on this, but it is offered on an introductory basis.
• Using Equity Release Plans with Immediate Care Plans – Some insurers will allow you to fund Immediate Care Plans through home equity if you don’t have enough cash immediately available. This means money will be loaned from your insurer and used to purchase the Immediate Care Plan.
Like an Equity Release plan, the loan plus interest are repayable when the property is sold, or when the person in care passes away.
• Savings & Investments – If you are of working age you are in the best position to plan for your future care needs. Remember, one in three people will require care (Source: Association of British Insurers October 2010) so the chances of you needing long term care are very high, even if it seems a long way off. If you want to plan for meeting the costs of long term care in later life, one option that is available to you is to save as much as you can, while you are earning, through investment plans, savings plans such as deposit accounts, ISAs and your pension. Money from these financial products can all be used to help pay for the cost of long term care.
If you would like to find out more about long term care, please call us on call us on 01603 340800; we’re here to help.
*Risk Warning: This is a lifetime mortgage. To understand the features and risks please ask for a personalised illustration.
Long term care is a complex area of financial planning and advice should always be sought before entering into a contract.
The information detailed is for general purpose only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice. GreenSky Wealth Ltd is an appointed representative of Financial Limited which is authorised and regulated by the Financial Conduct Authority. FCA No: 516410