What is Long Term Care Insurance?

The insurance industry is full of jargon, so the following are some commonly used terms to describe the types of health insurance products that are available.

Whilst the Financial Services Authority (FSA) distinguish the various health insurance policies available between Pure Protection and General Insurance, the definitions used here are as those determined by the CII (Chartered Insurance Institute).

Long Term Care Insurance (LTCI) is a type of health insurance that pays out a regular sum in the event of you needing care.

Currently, there are two types of LTCI:

  • Pre-funded insurance: This insurance contract provides a regular sum payable at some time in the future when care is needed, in return for a lump sum or regular premiums. The benefit is paid after you have been assessed as being unable to perform a certain number of Activities of Daily Living (ADL’s).
  •  Immediate care insurance: As the name implies, this insurance can be bought with a lump sum as soon as you have been medically assessed as needing care.

 

Why would I need Long Term Care Insurance?

LTCI should be considered for earners and non-earners who may at some time in the future find themselves in the potentially unfortunate position in being unable to look after themselves without the need of daily medical care or domestic help.

Generally LTCI is a way of mitigating or reducing the financial effects of a decline in health relating to you, your partner’s or family’s quality of life.  For example, the regular sum could be used to pay for daily care either in a residential or nursing home due to long term illness or old age.

The State also provides a number of benefits assisting with Long Term Care, some of which are means tested, and some are not.

 

How much will LTCI pay me on a claim?

The purpose of LTCI is to provide a regular sum for the care provided for you in old age or long term illness. It is not related to income, but to the capital needs of you or your family to fund the level of care required and therefore technically any amount can be assured. However it is usually dependent upon the suitability and affordability to your personal circumstances.

 

How long will I continue to receive LTCI payment?

Payments made from pre-funded insurance contracts are technically pure insurance contracts and will continue throughout life.

Immediate care insurance contracts are technically impaired life annuities and will continue to make payments throughout life.

 

How do I pay for Long Term Care Insurance?

Common to both pre-funded and immediate care LTCI policies is once the amount of benefit you require has been determined your monthly or lump sum payment or premiums for protection under the policy or cover will be offered to you by the insurer’s underwriter after they have reviewed a completed personal questionnaire relating to your occupation and lifestyle including a medical report.

Immediate care insurance policies are paid for by a lump sum. Pre-funded insurance policies can be paid for by a lump sum or regular monthly premiums which are usually reviewable every five years depending on the insurance provider i.e. the insurance company underwriting the policy.

Alternative source of funds other than from savings, investments and income is to pay for premiums by releasing equity from your home, from claiming accelerated death benefits of a health insurance or life assurance policy or from a viatical settlement of a life assurance policy.

How should I apply for Long Term Illness Insurance?

The first and most important step after you have decided you may have a need for LTCI is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of LTCI for your particular circumstances after assessing your needs and state benefits we make an application and complete an underwriting questionnaire on your behalf to take out a long term care policy based on how much you can afford and the amount of benefit required to match your needs.

 

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles by accessing the following at the Directgov website http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/Insurance/index.htm

and the Financial Service Authority (FSA) consumer guide available on their website at http://www.moneymadeclear.fsa.gov.uk/products/long_term_care/long-term_care.html

and the Association of British Insurers website at

http://www.abi.org.uk/Public/Consumer/Medical/abigtltc.pdf