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.
What is long term care insurance and what does it do? Long term care insurance is a way of insuring against the costs involved in paying for long term care. It is another name for an immediate needs annuity which, once in place, produces a monthly payment to a registered care provider for the rest of a person’s life.
The risk of a life time care insurance policy is that if a person dies early the original outlay is lost unless there is an element of insurance against premature death.
The purchase price of a care plan is based on the applicant’s life expectancy. Insurance companies take into account gender, age and medical condition by requesting a report from the persons G.P. Also they usually contact the care provider direct by telephone. If an individual’s life expectancy is deemed to be lower to chronic medical ailments, the price of the plan will be lower.
In addition to age, gender and state of health, the lump sum cost of a long term care policy is assessed by the level of monthly payments to the care provider. The monthly shortfall is calculated by deducting other regular income such as pensions and state benefits. The regular shortfall will help determine the amount of lump sum purchase price in return for a guaranteed income stream for life. The care benefits can be arranged to rise automatically every year by a given percentage to coincide with the care provider’s annual review date.
Why not suggest to the care home that they could agree to fixed 5% fee increases annually? In this way the care plan can be arranged to match these rises 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 commence providing for long term care payments make sure you access Barbara Davies’s essential free report concerning long term care insurance policies.