One day you may need care. How will you pay?

Simon Hildrey says think the unthinkable and look at insurance
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The Independent Online

One of the drawbacks of living longer is that more of us will end up in care homes. An estimated 500,000 people are already in residential care in the UK, and this figure is set to swell, with the number of over-65s predicted to increase by 43 per cent by 2026.

One of the drawbacks of living longer is that more of us will end up in care homes. An estimated 500,000 people are already in residential care in the UK, and this figure is set to swell, with the number of over-65s predicted to increase by 43 per cent by 2026.

But it seems we don't want to think about that, because demand for pre-funded long-term care (LTC) insurance (see the box below) has slumped. Norwich Union is the latest in a long line of companies to withdraw these policies, although "immediate need" plans are flourishing: sales for this type of LTC cover at Norwich Union rose by 30 per cent last year.

LTC insurance isn't cheap but the high cost of nursing care means more of us must consider it. A market survey last year by Laing & Buisson, a provider of statistics and analysis on the UK health sector, revealed that the average cost of residential care is £340 a week in England, rising to £472 for nursing care.

"Care in your own home costs at least £10 an hour," says Nicky Cave, head of independent financial adviser (IFA) the Millfield Care Partnership. "If you want a five-star residential care home in the Home Counties, for example, it will easily cost £550 a week."

On a pre-funded policy, a 60-year-old male should expect to pay a lump sum of £14,400 or £85 a month for Bupa's FutureCare Security plan. This pays out when he fails three out of six listed activities of daily living or at the onset of mental impairment. A woman of the same age would pay a single premium of £23,900 or £126 a month.

An immediate need policy for an 80-year-old male who needs help with dressing, washing, climbing stairs and getting out of bed, or who suffers a slight degree of confusion, would cost about £48,000. This would give cover of £15,000 a year for the rest of his life. An 80-year-old female will pay closer to £60,000.

Pre-funded policies may be cheaper than immediate need ones but Robert Elliot, chief executive of Care Asset Management, says many people dislike them because they may never have to make a claim. With immediate need policies, you pay only if you actually need care.

Many people find the money, says Mr Elliot, by selling their home - using some of the proceeds to buy immediate need cover and leaving the rest to their children.

If you don't want to take out an LTC policy, Mr Elliot recommends you start investing now to produce an income later on to fund the cost of any care.

Adrian Shandley, director of IFA Premier Wealth Management, warns it is also important to sign an enduring power of attorney to elect someone to look after your assets if you are considered incapable of doing so.

He says: "Some people have not signed a power of attorney, which only costs about £70. Then they have been taken into care and their relatives have not been able to access their money without applying to the courts. This can take months and cost thousands of pounds."

Joan Sanderson, an office manager from Southport, Merseyside, wishes her mother had signed an enduring power of attorney before she was taken into a care home with senile dementia. She says her mother was sectioned in December 2002, but: "We only received permission from the Court of Protection to access her money in September 2003. The solicitors and court fees have totalled somewhere in excess of £2,000."

Even now, every time Ms Sanderson wants to spend some of her mother's money, she has to apply to the Public Guardianship Office. "I have to explain what the money is for, such as presents for her grandchildren, and keep receipts for everything.

"We have no control over her estate. We have been ordered to sell her house to pay for her care fees of £10,000 for the 15 months she has been in the home."

LONG-TERM CARE POLICIES

Pre-funded LTC policies come in two forms. The first is traditional cover, where you pay a single regular premium to insure against a possible future event. You can take this policy out at any age, with your state of health at the time taken into account.

The second type is a combined single premium investment bond and regular premium LTC policy. These plans ensure that should the need for LTC arise, there will be some benefits available to you and, after you die, your heirs. The premium is withdrawn by the company each month from the value of the bond; if care is never needed, the value of the bond is returned to your estate.

Immediate need plans are taken out when you know you need care. You can pay a single premium to buy cover that will begin funding your care straight away. The cost depends on how long actuaries estimate you are likely to live: the average life expectancy after entering a home is two and a half years.

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