Your Options

State support is available, however if you have even a modest level of assets or income, including your home, you are expected use these before the state will help. With the average cost of a care home at £36,000 a year, [Source:The Daily Telegraph - 'cut the cost of nursing homecare' 07/06/2010] funding for long term care can have a devastating effect on your estate. There are two categories of long term care insurance - Immediate Care & Pre-Funded

An Immediate Care insurance policy is a tailor-made plan for those at the point of needing long term care. Immediate care plans are a type of annuity, i.e. they provide a guaranteed income for life in exchange for a lump sum investment.

You buy the policy when you require care either at home or in a care home. The policies are underwritten and you will be medically assessed to see how much you must pay for your chosen level of income. It pays out until you no longer need care, which is normally when you die. If you die earlier than expected, your estate does not get any money back, although some policies offer a guaranteed option which safeguards the capital in the event of early death. If you die later than expected, the insurer will continue to pay until your death.

Immediate care plans can be taken on a level basis, or some have the option to index link the cover, which means that the payment will increase each year to account for the increase in cost of care over time.

Pre-Funded care insurance is similar to most other insurance policies where you only make a claim if the event occurs. The policy will pay out when you meet the insurer's criteria in terms of inability to perform certain daily tasks known as ‘activities of daily living’.

A pre-funded care plan normally pays out until you no longer need care, which is usually when you die, however cheaper versions are available which pay for a limited period, or after a waiting period. This is a basic overview of the options available to you for funding of long term care. This area of financial planning will be fully discussed as part of a financial review.

We are unable to provide advice in this area but can introduce you to an authorised and qualified adviser.