Long-term care plan: Could a policy provide you with financial security?


Have you thought about how you’d pay for care if it were needed in the future? Would care costs affect your lifestyle or the legacy you leave behind? Planning for care can be challenging. After all, you can’t know whether it will even be needed. If you’re worried about how you’d afford care in your later years, a long-term care plan could offer a solution.

The number of people needing care is set to increase rapidly in the UK. It’s a trend that’s largely being driven by increased life expectancy. As a result, more of us are expected to experience complex health issues later in life. According to research:

  • Between 2015 and 2035 it’s anticipated that the number of over 65s needing round-the-clock care will rise by a third to over a million
  • The number of over 85s needing help throughout the day is expected to almost double to 446,000 in the same timeframe

These figures only account for those that require 24-hour care. There will be many more than will need support with certain areas of their life. The research highlights why it’s important to think about the potential cost of care.

So, how much does care cost? According to Paying for Care:

  • The average cost of residential care in the UK in 2017/18 was £32,344 a year
  • If nursing care was needed, this increased to £44,512 annually

Whilst the figures varied significantly depending on location and needs, it highlights the potentially significant sums involved. Paying for support at home is cheaper, but even two hours a day at £15 per hour mounts up to £10,920 each year. As a result, it’s important to think about where this money would come from if care was needed. If taking money out of savings or other sources isn’t an option, a long-term care plan may be appealing.

What is a long-term care plan?

A long-term care plan is a type of insurance policy that’s designed to give you peace of mind. Compared to other types of insurance, sales of long-term care plans in the UK are relatively low but care is a growing issue. Figures suggest there are less than 36,000 policies in force in the UK. As a result, it can be difficult to find a product that matches your needs.

Typically, this type of insurance policy will pay out a series of payments, usually monthly, to cover the cost of long-term care. There’s often some flexibility in how this money can be used, for example, you may be in control of deciding whether you want support in your own home or to move into a residential home.

5 things to check before taking out a long-term care plan

1. Are the premiums affordable?

You’ll need to keep up with insurance premiums. The cost of these premiums will depend on a variety of factors, including your current health and lifestyle. It’s important to consider how affordable these premiums are and whether this will change in the future. When you look at the bigger picture, would it be more affordable to save for potential care costs, for example?

2. When would a policy pay out?

Providers will set their own criteria for when a policy will pay out. It’s crucial that you understand when this would be and how it matches your expectations. Most will pay out when you can’t do a specific number of ‘activities of daily living’, such as washing without help or being unable to move from one room to another.

3. How much would you receive?

What level of cover would the insurance policy provide, and how does this match up to your needs or wishes? Reviewing the type of care on offer in your local area and the associated costs can give you an idea of how beneficial a certain level of cover will be. A policy with a lower level of cover will have cheaper premiums but it could mean you’d have to make compromises if care was needed.

4. What happens if care isn’t needed?

If you don’t need to use the policy, the premiums will usually not be returned. As a result, you may have paid out significant sums over a long period and receive nothing in return. However, there are a few policies that have a ‘return of premium’ clause or death benefits. Policies that include these will typically have higher premiums.

5. What are your other options?

An insurance policy isn’t your only option, and it may not be the one that’s right for you. Before taking out an insurance policy, it’s important to review other solutions. You may comfortably be able to afford to put money to one side to pay for potential care costs. Alternatively, you may be eligible for support from your local authority.  If you’re worried about the cost of care, please contact us. We’re here to help you review your financial situation and understand how the cost of care could have an impact on your plans.