Insurance against care costs

lisyloo

£70k is a SE biased figure.
My MIL is in south glos (Bristol).
Total fees are £48k, but after SP, AA and interest it’s £31k
I.e. don’t forget the income.
This is someone with no private pension.

She only had a flat, but has 5 years worth of money and has been self funded for 1.

Of course it will vary, but this is a real case and lots of areas of the country are not going to be £70k net of income.

Nebulous2

Malthusian wrote: »

A deferred care annuity will pay out when the deferral period ends whether you need care or not. So there is no possibility of it never paying out. The problem is that if you aren't in care when it pays out, you forfeit the tax benefits.

If you live for long enough - very long enough - the annuity could still be a winner despite the loss of the tax advantage. But the odds are against it (that's how insurance works), the odds are even more against it if you've forfeited the tax benefits, and purchase life annuities are very very niche for a reason.

Does it pay out if the person dies? That's the scenario I was thinking of. Some people go without needing care.

I'm out of touch, but there are (were) lots of different products. A lump sum paid while still fit and healthy could be considerably less than one paid with increased care needs, because it may never need to pay out.

lisyloo

In general no and that’s one of disadvantages. Care needs annuities provide payment whilst you are alive and stop when you die. That’s the gamble the insurer takes.

I’m confused when you say lump sum.
Care needs annuities pay out for on-going fees not a lump sum.

Nothing stopping you getting life insurance as well if you want, but the more insurance you buy the more money you are likely to lose (on average).

EDit: you can add on a min length guarantee, so you don’t lose everything if you die on day 1 after taking the policy. Naturally any option that provides a benefit will come at a cost.

Nebulous2

lisyloo wrote: »

In general no and that’s one of disadvantages. Care needs annuities provide payment whilst you are alive and stop when you die. That’s the gamble the insurer takes.

I’m confused when you say lump sum.
Care needs annuities pay out for on-going fees not a lump sum.

Nothing stopping you getting life insurance as well if you want, but the more insurance you buy the more money you are likely to lose (on average).

EDit: you can add on a min length guarantee, so you don’t lose everything if you die on day 1 after taking the policy. Naturally any option that provides a benefit will come at a cost.

The lump sum I was referring to was the price paid for the product, not the payment from the company for care costs.

There are a lot of different products available and some people on this thread are assuming they are all the same as the one they are familiar with.

bostonerimus

Keep_pedalling wrote: »

Who convinced them to go down the trust route? Unless they are now paying their children full market rent it won’t save IHT, which leaves the sole reason for doing it the avoidance of care costs which will be treated as deliberate deprivation of assets, so won’t work.

There could well be CGT to pay when the time comes to sell the property as well.

You are quite right welfare comes before inheritance, and staying out of a over my dead body type home should be a priority.

In the US it is possible to buy long term care insurance policies, although they can be expensive and many insurance companies have left the market. Luckily I bought a policy in my mid 30s through a plan offered by my employer and so the premium is inexpensive.

I just met with a lawyer to do some estate planning and because I have long term care insurance it makes things simple as I don’t need to put things in trust to exclude them from the estate so that Medicare picks up the cost.

lisyloo

Nebulous2 wrote: »

The lump sum I was referring to was the price paid for the product, not the payment from the company for care costs.

Ah right I totally get what you mean.
This would not have been possible in our case (and in many cases) as money was only available from the marital home after 1st death.

It’s a minority of people that have 6-figure sums available outside of their homes and pensions (comfortably off people would be better off having it inside a pension wrapper and that’s what I’m doing).

Buying an insurance on the off-Chance youll need it (when statistically you probably won’t) is really the preserve of the rich I.e. over 2 million wealth for a couple (i’m basing that on LTA). The irony being that the people that can afford it don't need it.

lisyloo

Nebulous2 wrote: »

There are a lot of different products available and some people on this thread are assuming they are all the same as the one they are familiar with.

It would be helpful if you explained what you mean.

https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/long-term-care/

This link says pre-funded care plans are no longer available.

The last time I looked (fairly recently) there were only 2 companies offering annuities (a third having recently withdrawn from the market).
There were options (such as annual increase, guaranteed period) but not lots of products.

What are the lot of different products you believe are available in the UK?