Due to the ever-increasing costs of providing care for the elderly, many people have taken specialist financial advice surrounding Long Term Care Insurance (LTCI) products. Whilst many of these products are no longer available to new investors it is important to understand how they all work as legacy products are still in existence and could be called upon in the future to help you pay for your care needs.
The types of care plans fall into two categories:
has more or less disappeared from the market, one of the explanations for this is a higher than expected level of claims on the policies, in other words, the underwriters got their calculations wrong. Actuaries would have based the premiums for such policies on anticipated life expectancy and how likely a claim would be for individuals taking into account such things as their current health, medical history, family history and even where in the country they lived. Due to improvements in medical care many, more people can expect to live for longer and therefore the insurance companies would be expected to pay the income to the residential home for far longer than initially expected.
There are two main types of pre-funded care the first of which is a typical insurance policy that would have required the regular payment of premiums and would have provided protection just in case care was required. As with most life insurance policies, this type of protection would not provide a repayment of premiums if not claim were ever made or generate cash in value at any time.
The other type of pre-funded care plan was a combination of a lump sum investment bond with a protection policy. The idea behind this arrangement was for the long term care investment bond to produce the income to pay for the premiums to a care protection plan. The main benefit to this type of plan is that with careful planning some of their assets would be able to pass onto their beneficiaries on death. However, due to falling investment markets, the returns were unlikely to be able to maintain the premiums required on the policy.
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