Please note: this article was not written by a financial or legal specialist, and does not cover every circumstance. Please consult a specialist before making any financial or legal decisions. 

Pre-funded long-term care insurance provides a regular income which can be used to pay care home fees or the cost of care within a person’s own home.

Please note that long-term care insurance policies are no longer sold (although some limited alternatives are available).

However, a currently-available option to help you manage the cost of care in old age is an immediate need annuities (also called ‘immediate care plans’, ‘care fees plans’ or ‘care fees annuities’) or deferred annuity.

Circumstances for receiving long-term care insurance payments

A pre-funded care plan is when someone pays into an insurance plan before they need care. The premiums are paid either as a lump sum, monthly or yearly.

Long-term care insurance products will normally pay once someone can’t manage to do certain daily living activities alone, such as:

  • Washing
  • Dressing
  • Being mobile
  • Preparing food
  • Going to the toilet 

Questions about funding care?

Call us for your free consultation with one of our friendly UK care experts. If you need further support, our Care Concierge service is on hand to provide guidance on typical care costs, help you explore your funding and benefit options, or even negotiate care fees on your behalf.

Find out how Care Concierge can help you, or call now on freephone:

0800 098 8299

(Mon-Fri, 9am-5pm)

Alternatives to long-term care insurance

Traditional long-term care insurance policies are no longer sold, due to the escalating cost of care and growth of life expectancies in the UK.

However, some companies do now offer some limited cover as an additional benefit to a more traditional critical illness policy or a specific limited benefit Assisted Living Insurance which provides a specified “pot of money” (either £20,000 or £30,000) to the insured if they lose mental capacity or fail two or more activities of daily living.

These are:

  • Washing
  • Dressing
  • Mobility
  • Transferring (from a bed to a chair etc)
  • Continence

However, this cover won’t provide an indefinite annual income to meet the ongoing cost of care.

To do so you need to consider a long-term care annuity. There are two kinds of these – an immediate need annuity and a deferred care annuity.

Using an immediate needs annuity to pay care costs

An immediate needs annuity is a way for you to provide funding for long-term care in your old age. It is usually used when someone needs care immediately and does not already have cover in place.

Having an immediate needs annuity means that you invest money now in order to pay a regular tax-free income to your regulated care provider in order to cover the cost of your care, for as long as care is needed.

If you bought an immediate needs annuity then you made a one-time lump-sum contribution This is converted into an ongoing, guaranteed stream of income for a specified period of time or for a lifetime. 

You can then use the income to directly pay your care fees.

Read more about immediate needs annuities.

Using an deferred annuity to pay care costs

A deferred annuity is a way for you to provide funding for long-term care in your old age. 

Buying a deferred annuity means that you invest money now in order to pay a regular tax-free income to your regulated care provider in order to cover the cost of your care, for as long as care is needed.

To buy a deferred annuity you make a one-time lump-sum contribution You then defer the payout of this annuity for anything between one and five years. The longer you defer for, the lesser the plan costs. 

You pay your care fees up until the deferment period ends and then your annuity is converted into an ongoing, guaranteed stream of income for a specified period of time or for a lifetime. 

You can then use the income to directly pay your care home fees.

Read more about deferred annuities.

Consulting a care fees adviser about immediate needs annuities

Buying any financial product is a big purchase. By consulting a care fees adviser you will get impartial and expert advice tailored to your exact financial situation, given by someone who knows the care system inside out. This means you can make the best choice for your specific circumstances.

The care fees adviser will ask your detailed questions about your circumstances and care needs. Using this information, they  will make you aware of all your options when it comes to paying care fees, and also give you advice on how you can proceed, including suitable financial products and services.

More about consulting a care fees adviser.

Questions about funding care?

Call us for your free consultation with one of our friendly UK care experts. If you need further support, our Care Concierge service is on hand to provide guidance on typical care costs, help you explore your funding and benefit options, or even negotiate care fees on your behalf. Find out how Care Concierge can help you, or call us now on freephone:

0800 098 8299 (Mon-Fri, 9am-5pm)

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