Description

The concept of Long Term Care (LTC) is to pay out regular income (or in rare cases a lump sum) to either an individual or an officially recognised provider of care, once the insured is unable to perform a specified number of ADL’s (activities of daily living).

Long term care products fall into two categories:

• Pre-Funded Plans

Here an individual pays in advance for cover. Regular or single contributions are made and contracts can be purely insurance based or investment based with degrees of insurance cover.

• Immediate Care Plans

These plans provide help with care fees, which are due now. This where a lump sum is paid to an insurance company, which promises to meet certain set payments for the rest of the policyholder’s life ie. an annuity.

Advantages

• It protects the family assets from being sold to provide care fees.
• The benefit can provide for nursing home or own home care including round the clock nursing.
• No tax charges when benefits are paid.
• Policies can be funded on either a lump sum or regular premium basis.
• Contracts are available to provide immediate cover.
• Enables working family and family working away from parents to have cover which protects parents.
• Individuals can ensure that their inheritances are preserved for their children.
• Protection for Home. LTC policies will help ensure that a house does not necessarily need to be  sold when an individual goes into a nursing home or residential care.
• Protection of Personal Assets. LTC cover ensures that individuals with total assets greater than £12,750 do not have to call on these savings to pay nursing home fees.

Disadvantages

• There are currently relatively few providers. 
• No tax relief is currently available on premiums.
• The policy may not necessarily cover acute conditions, e.g. hip replacement or other major surgery.
• The policy will not cover disorders that cannot be clinically proven, e.g. some mental illnesses.
• If the person dies soon after taking out an Immediate Care Annuity the plan would have cost more than it paid out.  You can choose to take out a life assurance option to get a lump sum on death (Capital Protection option) althouth this will put up the cost of the plan.

Points of Interest

• This is such a complex area that it is essential that independent financial advice is taken.