" I am truly grateful for all the work that you have done on my behalf" (Miss V.H. Retired)

Long Term Care Planning is a complex and specialised area and we strongly recommend that you seek professional guidance before making any decisions. Please call us on freephone 0800 027 0426 to arrange for an initial consultation which is held without cost or obligation. Below is some information which you may find helpful prior to meeting with us.

What is long-term care?

Long-term care refers to care you need for the foreseeable future, maybe as a result of permanent conditions such as arthritis, a stroke or dementia. It could mean help with activities such as washing, dressing or eating – in your own home or in a care home (residential or nursing).

How do you pay for long-term care?

There are different ways to help you pay for long-term care.

 

Always check with your local authority about any support they give. The social services department will assess your care needs and your income and savings. If your income and savings are low the local authority will pay some or all of your long-term care costs.

 You may also qualify for Disability Living Allowance if you are under 65 or Attendance Allowance if you are over 65. Attendance Allowance cannot normally be paid if social services or the NHS are funding your care in a care home.

 Although social security benefits are the same throughout the UK, other help provided by local authorities varies. So do check what your local authority offers.

 If you don't qualify for financial help from the local authority, you will normally have to pay towards the cost of care out of your own income and savings (potentially even having to sell your own home to meet the costs). There are many different ways to help you pay for long-term care. This section looks at how long-term care insurance might help you and how it works.

 Long-term care insurance

 Long-term care insurance is one way of insuring yourself against the cost of long-term care. It is expensive and complex and you should get advice from us before making any decisions.

It's possible to fund long-term care fees in other ways, but again, you should seek advice before deciding the best one for you.

Types of long-term care insurance

There are two types of long-term care insurance, which you can buy either when you need care or in advance. This section explains how they work.

• Immediate care LTCI – you buy this when you actually need care.

• Pre-funded LTCI – you buy this in advance, in case you need care in the future.

Firms advising and selling LTCI must be regulated, or be the agent of a firm that is regulated. This means we have to meet certain standards.

As a regulated firm, we must only recommend products that are suitable for you and must give you certain information about our services and costs.

Once we have ascertained that a particular product is suitable for you, we'll also give you a Key Features document, which sets out:

• the particular features of the product;

• how it works;

• the policy benefits;

• what premium you'll have to pay; and

• the cooling-off period – the length of time after completing the application in which you can change your mind.

Immediate care long-term care insurance

You can buy immediate care long-term care insurance when you have been medically assessed as needing care. This can be at any age.

How does it work?

You buy an immediate care plan with a lump sum. This pays out a regular income for the rest of your life, which is used to pay for your care.

What does it cost?

The amount you pay varies depending on:

• the amount of income you want;

• whether you want the income to increase, for example, with inflation;

• your age and sex; and

• the state of your health.

You'll be assessed medically to determine how much you must pay for your chosen level of income.

Is it right for you?

• You should check what's available from your local authority first, to ensure you don't lose out on means-tested State benefits.

• If you have valuable savings or assets (such as a home) that you don't want to lose, LTCI may be worth considering.

• LTCI may also help you choose better quality care than your local authority would help pay for.

Questions to consider with your adviser

• How much cover do you need? Most LTCI policies typically cover only part of the cost of care, with the remainder coming from your income and State benefits.

• How much could you pay out of your income towards long-term care, including State benefits, and how much extra would you have to find to meet likely care fees?

• How much would LTCI cost to meet the shortfall, either as immediate care LTCI or as pre-funded LTCI?

• What happens when you die? Usually the income stops and capital is not repaid unless you've chosen a plan which provides some death benefit (ie a lump sum paid to your estate).

• Is inflation taken into account? Most plans let you choose whether or not the money you get from the policy is fixed, or increases either by a set amount each year or in line with inflation.

• Are there other more suitable ways to meet the cost of care?

Top tips

1. Check what State benefits you may be eligible for and what your local authority can provide.

2. Ask questions if anything is not clear.

Pre-funded long-term care insurance

You can buy pre funded long-term care in case you need care in the future. You can buy it at any age, but some have restrictions.

How does it work?

You take out an insurance policy that will pay out a regular sum if you need care. It pays out if you are no longer able to perform a number of activities of daily living (such as washing, dressing or feeding yourself) without help, or if you become mentally incapacitated. The money it pays out is tax-free.

Some existing policies may be linked to an investment bond, which is intended to fund the premiums for the insurance policy. These policies involve more investment risk and, in some cases, can use up your capital.

What does it cost?

You pay either regular premiums (for example on a monthly or annual basis) or a single lump sum premium. In either case, the insurance company usually reviews the plan, say every five years, and the premiums may then rise – even if you've bought a single premium policy. Premiums depend on your age, sex and the amount of cover you choose.

Is it right for you?

• You might never need care, and so you don't claim, in which case you may not get any money back. However, with an investment-linked policy, you get the balance of the investment fund if you cash in the policy. But how much you get will depend on how well the investment element has performed and how much the insurance premiums that it is intended to fund have increased – in some cases there could be nothing left.

• Any money you get from the policy may affect the amount you can claim in means-tested State benefits.

• If you have valuable savings or assets (such as a home) that you don't want to lose, LTCI may be worth considering.

• LTCI may also help you choose better quality care than your local authority would help pay for.

• What's not covered?
  Temporary problems, such as care after an operation won't be covered. Nor will health problems caused by alcohol or drug abuse, or due to attempted suicide, or if it relates to HIV or AIDS. Some mental conditions such as depression and schizophrenia are also usually excluded.

• What happens when you die?
  This will depend on the type of policy, the options selected and whether you are taking benefits from the plan at that time.
  • Before benefits are claimed:
    • Some insurance policies will pay out a lump sum to your estate if you die within the first few years of taking out the policy without actually claiming on it. However, most pay nothing.

    • Investment-based contracts should return the balance of the investment (but this will depend on investment performance and whether insurance premiums have reduced the value).

  • After benefits are claimed:
    • After benefits have begun to be paid, the income usually stops. Some plans may provide a minimum return or a capital lump sum. Investment-based contracts may return any unused capital.

• Is inflation taken into account?
  Most plans let you choose whether or not the money you get from the policy is fixed, or increases either by a set amount each year or in line with inflation.

• Are there other more suitable ways to meet the cost of care?

Top tips

1. Check what's not covered and ensure you disclose any existing medical condition.

2. Ask questions if anything is not clear.

Getting help

Planning for long-term care is a complex matter. Here are some tips on how to get advice so you get a product that's right for you. Detailed analysis of your income, savings, capital and benefits needs to be made, so you should seek advice from us before taking out any product to cover long-term care costs.

We will only recommend a product if it is right, and suitable for you, based on the information you give us.

We provide a complimentary initial meeting so that you can discuss your situation with us in complete confidence and without obligation. To find out more please call us on 0800 027 0426.

 

Financial Future Associates LLP is an appointed representative of IN Partnership the trading name of The On-Line Partnership Limited which is authorised and regulated by the Financial Services Authority