A high price for peace of mind
John Chapman wonders if long-term care insurance is worth the hefty premiums
Saturday 26 July 1997
Since the passing of the Community Care Act in 1993, local authorities can take the costs of such care from a person's income, and from any assets above pounds 10,000. Unless you have a spouse or an aged or incapacitated relative living with you, even your house could be taken to cover care costs.
What are your chances of needing care? The position is not clear. Insurers speak variously about the likelihood being one in six or even one in four. A more neutral estimate comes from Richard Best in a paper by the Rowntree Foundation: "There is only a one in 20 chance that you, on reaching pensionable age as a man or a woman, will require residential or nursing care. Even if you live to 80 or 85 the chances are only one in four or one in five."
The average spell in a residential home is three years and in a nursing home about eighteen months. Yet a minority of those needing care live for much longer periods and the effect on their assets can be dramatic.
What can we do? Nothing, is one option. If your family is well off they may not need your assets. Alternatively, your family may look after you. This is quite common. Love and duty are no doubt the main factors, but there is now an interest in preventing inheritable assets being swallowed up by local authorities. A further option is to give your assets away. There is little sense in becoming the richest man in the churchyard, particularly when your children have real needs. But gifts obviously given to avoid care costs could be clawed back by the local authority.
Finally, there are "long term care" insurance policies (LTC). There are about a dozen pre-funded policies, but the premiums are substantial. To purchase cover of pounds 1,000 a month a man aged 55 might pay premiums of pounds 50 to pounds 70 a month, rising to pounds 80 to pounds 130 a month by age 70 (before inflation). For women, premiums are a third higher. There are also "immediate cover" policies, which provide impaired lives annuities - annual income paid out to people who are ill and may die within a short space of time.
These might cost pounds 35,000 to pounds 40,000 for men, and pounds 50,000 to pounds 55,000 for women. Payouts under such policies are only triggered if you fail tests on two or three activities of daily living - mobility, washing, dressing, feeding, toiletry and continence.
With such charges, it is no surprise that the LTC insurance market has not taken off. Some 20,000 or 30,000 policies have been sold.
The previous government suggested a "partnership approach". For each pounds l of insurance cover purchased a further pounds l.50 of assets would be protected. Someone who bought pounds 40,000 of LTC cover would have pounds 70,000 protected from local authorities. New Labour has backed away from this commitment and has promised a Royal Commission on the subject instead.
Meanwhile the debate has been further confused by a decision of the courts that local authorities are not obliged to provide care if they have insufficient money. But it is difficult to envisage any local authority leaving its aged to fester.
If you are now considering the risks of facing a period of care, do not to be sweet-talked into buying LTC policies through sales-pitches about the availability of helplines, care counsellors and the like. If you are worried about the future as you get old, it is important first to talk to your family, your local social services, and bodies like Age Concern.
If you do have assets to protect, buying LTC insurance is an option, though expensive. The important thing is not to pay pounds 1,000 a year or more just for the "peace of mind" that could be obtained for nothing by other means.
John Chapman, formerly a senior official at the Office of Fair Trading, is the author of several hard-hitting reports on the financial services industry
13 September 2014 12:00 AM
30 August 2014 12:00 AM
05 September 2014 11:30 PM
30 August 2014 12:00 AM
The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options
22 August 2014 10:30 PM
Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator
22 August 2014 10:30 PM
16 August 2014 12:00 AM
16 August 2014 12:00 AM
- 4 Alex Salmond: 'The rocks would melt with the sun before I'd ever set foot in the House of Lords'
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize