Essential Facts About Long Term Care
Long term care often arises because elderly people can no longer manage a number of daily living activities without help and it is envisaged this will occur for their lifetime. It comprises of support with daily living activities like washing, dressing or walking and can be provided in the person’s house, in a residential home or nursing home.
Quite often a stroke or heart attack happens out of the blue, resulting in the need for immediate long term care. Other symptoms such as Alzheimer’s disease can develop more slowly requiring increasing levels of care.
How does a long term care insurance policy work? Basically this is a lump sum insurance plan that guarantees a regular payment to help pay for life time care. The purchase price is progressively cheaper relative to adverse health and older age unlike life insurance which is progressively less costly due to younger age and better health.
When a person dies, the income stops and the care plan purchase price is non refundable unless there is some form of capital protection against early demise.
Long term care insurance plan premiums are calculated based on the individual’s life expectancy. this is forecast by reference to medical information provided by the person’s family doctor. Also insurance companies endeavour to speak to care home staff for an up to date hands on assessment. The cost of a care plan is less relative to correspondingly deteriorating health and frailty.
The amount of long term care insurance payments required is determined by the monthly cost of care less the person’s state pension, benefits and other income such as private pensions. The balance required to meet the care fees bill is the shortfall. It is this regular shortfall that can be paid for life by payment of a once only lump sum to an insurance company. It is possible to pay extra to make sure that the benefits increase each year in line with rising care costs.
When arranging the annuity, it is a good idea to ask the care provider about the history of price increases so that this can be taken into account when arranging the level of benefits required. Better still ask the care provider if they will agree to fixed annual fee rises at say 5% in return for direct payments into their account that increase automatically every year.
Even a guaranteed care plan cannot take into account increased care costs if there is a need the need to move care homes. This may be due to a requirement for nursing care or if the present care home closes for some reason or is taken over by a larger group. A regular NHS contribution is made for persons assessed as needing registered nursing care. However if the person’s health has deteriorated to such an extent that they qualify for continuing care, this is fully funded by the NHS.
Payments from long term care policies are payable direct to registered care providers and taxed in their hands as a trading receipt. In this way there is no tax payable on the income stream by the person receiving care.
before you start planning for long term care payments make sure you access Barbara Davies’s vital free article about long term care insurance plans .
