Long-term care indemnity

Money-saving-gal

Hi All I'm new today.....apologies for repeating myself, I just posted on another part of the site before I noticed this bit.....

Has anyone bought one of these policies that cover a person's care home fees? My dad's in a care home costing £700 per week and at this rate he will burn through his whole estate in no time. Can't get help from soc. services, NHS etc - tried really hard!!!

Just wonder if you think this is a good option? Cost between £60,000 and £90,000 but cover fees for life.

Many thanks:rotfl:

dzug1

Money-saving-gal wrote: »

Hi All I'm new today.....apologies for repeating myself, I just posted on another part of the site before I noticed this bit.....

Has anyone bought one of these policies that cover a person's care home fees? My dad's in a care home costing £700 per week and at this rate he will burn through his whole estate in no time. Can't get help from soc. services, NHS etc - tried really hard!!!

Just wonder if you think this is a good option? Cost between £60,000 and £90,000 but cover fees for life.

Many thanks:rotfl:

Whose £60K-£90K? His, or yours?

Statistically that policy is going to turn in a profit for the insurance company - that is most policy holders are going to die before the premium has been paid out in fees. OTH it does take away the worry of where the fees are coming from until capital runs out.

I decided not to take one out for MiL - an IFA backed me up.

Ultimately it's up to you/him (if it's his money) and your own personal values

Money-saving-gal

thanks dzug1 - the money would have to come from my dad's estate and would represent a sizable chunk but it would leave a bit, whereas I can see the whole lot being swallowed up otherwise.

dzug1

Remember you are gambling on his life expectancy with the insurance company - and they have statistics on their side.

They will almost certainly want a medical report and possibly an actual medical before you can take the policy out - if he's particularly healthy they will take account of that in the premium.

On the practical side - do you have Power of Attorney? If not, is he still capable of making these decisions (to spend the money/release medical data) for himself?

It is a difficult decision either way. If you get it 'wrong' is there any beneficiary of his estate who might want to get back at you?

Adrian_Garside

There are only two providers for Long Term Care annuities and you can only access them via an IFA qualified in Long Term Care.

The process for getting an illustration is that the companies will obtain medical info on your father from his doctor and the care home, so they will know his state of health in some detail and be able to figure out his life expectancy.

You will want them to calculate the cost of providing an annuity for the shortfall figure that is the difference between his income from pensions and benefits and savings interest - lets say that turns out to be £500pw.

They will then provide illustrations for £26000pa income, either on a level basis or an increasing basis to cope with inflation.

It's quite surprising the difference between the quotes provided by each company - a recent one I arranged had one quote at £70000 and the other at £95000.

They will tend not to quote if your dad's life expectancy is less than 2 years.

If your dad has an Inheritance tax liability, then the cost of the annuity comes out of his estate, so that can make the expense easier to cope with as it denies the taxman some IHT.

As to whether they are a 'good idea' or not - you have identified the problem - you need to be able to predict the future to assess that.

The main feedback that I have is that writing the cheque out each month for £2800 is a horrible experience for the person in care/the attorney. This experience is removed.

It also removes the stressful feeling of injustice that his hard won estate is diminishing.

Both these points can help maintain a pleasant, stress free relationship with your father.

It is more likely that these 'soft' reasons are the decider, than financial reasons. Financially, it is a literally 50:50 call.

There is an option to set up the annuity to pay half his fees, making the costs half, and the "gamble" half... that may be easier for you!

Good luck

Adrian

Adrian_Garside

Oh - they won't do a medical, his records will be suffice.

And a point made above - it is advisable for all his beneficiaries to be included in the decision to save issues later, people get funny about money.

A good IFA will be a help, but if you one who is being overly pursuasive back off and use someone else.

Money-saving-gal

Thanks for the advice Adrian - I was hoping to get an answer from someone like you!

Although my dad is too doddery to be looked after at home - his or mine - and has dementia, he is surprisingly healthy i.e. takes no medicines, strong heart & lungs etc. Therefore, his life expectancy could be at least another 10 years or so and this would make the indemnity option v. expensive.

However, I hadn't thought about the 50/50 option which sounds like it could work. My dad has a couple of benificiaries (none that see him apart from me!) but I'm not worried about preserving the cash for them or me, I just want to be sure we can cover him in the care home for as long as possible. I don't have PoA (dad wouldn't hear of it and now he cant grant it because of the dementia) so we are currently applying to the court of protection to be able to shore up his funds in whatever way will make it last longest.

I feel better now knowing there are some options. Thanks everyone!