Shelter for the winter years

PRIVATE HEALTH; A SPECIAL REPORT : Jane Suiter reports on a variety of long-term plans

The prospect of being old and bed-ridden, relying on your family for support, is a nightmare for many people. And increasingly, since the Community Care Act came into force in 1993, it is becoming a reality. It is now the family which is obliged to provide for its old folk.

Add to this the advances in health care, which mean longer life expectancy, and it is unlikely the state will go on providing even the minimum amount it does now.

The number of adults needing to be looked after in a nursing home is set to double to 1.2 million in the next 40 years. According to a recent survey 18 per cent of people believe they will have to pay for their care in old age but in reality the experts say this figure could be as high as 60 per cent.

Those with assets of pounds 8,000, including the value of a home, are no longer eligible for assistance from the state when they find themselves unable to cope alone. They, or their families, must pay .

Long term care cover is the financial companies' answer to this problem. The insurance will pay for care in a nursing or retirement home or even for a nurse to attend at home.

Insurance comes in a variety of forms. The first can be bought by a lump sum payment to provide immediate healthcare benefits. This is suitable for the elderly person who needs care now. Eagle Star's plan which can be used in these circumstances is made up of a series of policies which are gradually cashed in to pay for care. Commercial Union and PPP offer similar plans.

The second, and more usual route, is the pre-funded version. Big players in this market are Commercial Union, Hambro Assured, Prime Health, PPP Lifetime and Scottish Amicable European.

These policies can usually be paid for with lump sums, regular payments or a combination of both. Minimum monthly payments range around pounds 20 to pounds 30 while minimum lump sums are between pounds 2,500 and pounds 10,000.

PPP will accept a minimum lump sum of pounds l,000 where regular premiums are paid while Commercial Union still demands pounds 2,500.

Gary Jefferies, an independent adviser with Tunbridge Wells-based Warwick Leigh, says these products are excellent for those approaching retirement or who have just retired. The lump sum part of a pension can then be put to good use, he says.

"This allows them to provide for a predetermined level throughout their lives and ensures the remaining capital can be invested," he says. "Otherwise they have to maintain high levels of savings should they need home care or nursing home fees later in their lives."

However, one problem with many of these plans is that they are simply insurance. If you do not need long term care the plan will be worth nothing. Scottish Amicable is the exception. It pays for itself by taking the payments for the insurance out of the growth in an investment bond.

The plans are also tax efficient. Money grows untaxed and is then paid directly to the care provider.

The minimum age for taking out the plan depends on whether or not it is to pay for immediate benefits. Most of the immediate care plans have a minimum age of 60.

For future benefits the minimum age ranges from 40 for Commercial Unions' Well-Being Insurance to 21 for PPP and 17 for Scottish Amicable European, although most companies readily admit their books are not exactly full of 20 somethings clamouring for long term care.

The maximum enrolment ages are correspondingly higher with the immediate care plans. Commercial Union accepts people up to age 90 and PPP to age 100. For the pre-funded version the limits range from 75 for Commercial Union to 79 for PPP.

All the plans pay out according to disability. But there are big differences between companies and it is important to check the small print.

Prime Health uses a points system where levels of disability are allotted certain points. Benefits are paid when points exceed a certain threshold. Commercial Union and PPP both pay out half your benefit for a reduced degree of disability.

You can also choose to have cover which only pays for institutional care, which saves money. Another way to cut costs is to opt for cover which only lasts for a few years. Research in Canada and France shows the average length of time spent in institutions is less than two years and 95% of claims last less than five years. However, this would be cold comfort for anyone who did need the cover for longer.

Most of the plans also have a deferred period. when the insurance will not pay out. These range from 90 days with Scottish Amicable to 13 weeks with PPP.

Like most insurance, premiums go up with age and are usually higher for women than men.

An average 55-year-old man will pay pounds 54 a month for basic cover with Commercial Union for a pounds l,000 a month benefit, whereas a woman the same age would pay pounds 77. Prime Health does not distinguish between men and women and can sometimes therefore work out cheaper for women.

Younger people are more likely to have long term care as a bolt on to their permanent health insurance(PMI) or critical illness policy.

Bupa's financial health protection plan basically converts to a long term care plan once the policyholder reaches retirement as does Lincoln National's plan.

J Rothschild International provides the insurance under its Lifetime Cover Plan and Pegasus offers it under its Combined Health Plan.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
Katie Hopkins makes a living out of courting controversy
General Election
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Ashdown Group: Head of Client Services - City of London, Old Street

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders