08. Long-term care insurance Flashcards
When is LT care required?
When a person becomes ill or suffers a disability or mental impairment that makes them unable to carry out their ADLs, with the probability that this disability will continue over the LT.
Significant variation in care by location is referred to as what?
The ‘postcode lottery’.
What does the Care Act 2014 require?
Individuals with savings to pay for their own care.
Name 2 things the NHS is responsible for.
- peoples’ medical & health care at home (through GPs) or in hospital
- prescription drugs (free for > 60s)
What is the NHS generally not responsible for? [2]
Personal or domiciliary care.
For which residents is the NHS responsible for meeting the full cost of care home costs?
Those whose ‘primary need’ for being in a care home is health-based.
(Called NHS continuing healthcare or “fully funded care”)
What other type of care does the NHS pay for?
Nursing care.
Individuals assessed as needing nursing care in a nursing home are entitled to receive what?
An additional nursing care allowance, known as NHS-funded nursing care.
How is NHS-funded nursing care assessed, what is the tax status and what does the amount paid depend on?
- non-means tested
- tax free
- where you live
How is payment for nursing care in the UK made?
Directly to the care home by the ICB.
Where an individual pays for their own care fees, what state benefit can they claim if they need help with personal care and/or supervision?
Attendance Allowance
When is Attendance Allowance available, who is it paid for by and what is it’s tax status?
- from SPA
- by the DWP
- paid tax free
What is the LA 3 step process re the criteria for means testing?
- assess, on request, someone’s care needs
- determine, through a means test or financial assessment, whether the LA should fund or partially fund the care needed
- determine max fee levels
For respite care, a LA is only required to apply the means-test benefit rules after how long?
6 weeks.
What is the personal expense allowance (PEA)?
When assessing an individual’s level of contribution, it is the amount of money a LA must leave a person to cover their personal expenses.
Who sets the personal expense allowance (PEA) and how frequently?
The government, annually.
What are the rules if a person’s assets are between the upper and lower thresholds?
Each £250 of assets (or part thereof) over the threshold is assessed as giving £1 a week of ‘tariff income’.
What are the 2024/25 lower and upper savings limits in the UK?
Lower = £14,250
Upper = £23,250
LAs must use national guidance contained in the Care Act 2014 when taking into account income & assets.
Name 3 incomes that are fully taken into account and 1 that is not.
- pension income
- state benefits
- investment income
- trust income
- letting income
- Attendance Allowance
- earnings
Name 2 things the LA disregards when it comes to assessing assets.
- personal possessions
- the surrender value of insurance bonds where there is an element of life assurance
The value of an individual’s home is disregarded if who is living there?
- resident’s partner, former partner or CP (unless resident estranged or divorced)
- a lone parent who is the claimant’s estranged or divorced partner
- a relative of the resident or member of resident’s family > 60 or child of resident < 18 or is incapacitated
What other circumstance might the LA disregard the value of the property?
Where someone who is not a relative of the individual in care has given up their home in order to live with that individual and provide care.
How long is the value of an individual’s home disregarded for when they enter a residential setting for care?
12 weeks.
If as person’s assets exc their property are worth less than £23,250, the LA cannot force the individual to sell their home. What can they do instead?
Request a charge be put on the property to be repaid on death.
What is a deferred payment plan?
Where a charge is put on a property to be repaid on death, it is then rented which may help subside care costs and allow the individual’s estate to benefit from future property rises.
Following 1st death in a couple, how might a whole home be disregarded should the surviving spouse need nursing care at a later stage?
By changing ownership from ‘joint tenants’ to ‘tenants in common’ and on 1st death, that half of house is passed to children or into trust.
What is the deliberate deprivation rule?
Individuals found deliberately depriving themselves of capital to avoid care fees will be treated as having ‘notional capital’ to the value of capital disposed of.
Deprivation of assets is illegal. What could the LA do by going to law?
Claim their fees back and probably their costs too, so the overall cost could be considerable.
What is the time limit for the transfer of assets taking place before care was needed to avoid the deliberate deprivation rule?
There is no legal time limit.
The burden to prove deliberate deprivation is on the LA but what do they have to prove?
That deliberate deprivation was a significant motive, not the only motive.
Name the 5 main types of LT care.
- family care
- professional care
- care at home
- care in a care home
- sheltered housing, extra-care housing and close care
What is the aim of LTCI?
To provide a planned way to pay for some or all of the cost of LT care required because of LT illness or extreme old age.
Why are people turning to LTCI? [3]
- state benefits e.g. PIP, AA, rarely cover all the non-nursing costs of LT care
- some benefits are means-tested so so help for those with more
- LAs have limited resources to assist.
What are immediate needs plan (annuities)?
Lump sum single premium policies used to purchase care immediately.
How do immediate needs plans work?
The provider assesses the applicant’s future life span and quotes a lump sum premium which guarantees to pay a set fee directly to the home, free of tax, for as long as they live.
Immediate needs plans can be level or indexed, but what do guarantees do?
Ensure that all the capital is not lost if the individual dies shortly after taking out the plan.
Name 2 possible eligibility requirements for immediate needs plans.
- applicant must be unable to perform at least 1 ADL, or;
- must be suffering a cognitive impairment e.g. dementia
What are the 2 tax statuses for immediate needs plan benefits?
- tax free if paid directly to the care provider
- taxed if paid directly to the policyholder (same as PLAs)
If a care recipient has sufficient funds for care for a few years but is worried about running out after, what might they look at?
Deferred care plans
Name 2 benefits of deferred care plans.
- much cheaper than immediate needs plans
- act as an insurance against living longer than expected so “peace of mind” products
What is a cash care plan and how does it work?
- a plan that provides cover against the future possibility of needing care
- it pays out a cash sum and/or income for a set period
What is equity release?
A way of exchanging some of the equity in a house for capital, which can then be used for care if required
Who is equity release useful for?
Those with high levels of assets but a low level of income.
What are the 2 types of equity release?
- lifetime mortgages
- home reversion plans
What do lifetime mortgages allow?
They allow the release of equity from a home in either a cash lump sum or series of payments.
How are lifetime mortgages normally repaid?
Usually repaid with accrued interest when the individual dies or sells the house to move into LT care.
What are the 2 main interest options under a lifetime mortgage?
- interest only mortgages where interest on mortgage is paid normally at fixed rate
- roll up mortgages where interest normally fixed but rolls up and is not paid until individual dies or goes into permanent residential care
Name 2 disadvantages of lifetime mortgages.
- cash received could reduce or remove state benefit entitlement
- early repayment charges can be very expensive
How do home reversing plans work?
Part, or all of the home is sold to a reversion company. The individual retains a lifetime tenancy and can remain in the property until death or entering permanent residential care.
Name 4 disadvantages of home reversion plans.
- customer won’t get full MV of home
- can’t make structural changes
- plans are difficult to reverse
- customer likely to lose out if they move soon after taking out reversion
Name 5 ways how can an individual meet their own care costs.
- savings / investment disposals
- pensions
- selling capital assets
- selling / letting the home
- accelerated death benefits e.g. CIC
- viatical settlement (sale of terminally ill person’s life assurance policy)
In determining capital and income needs for care, what should an adviser consider? [5]
- income need, now and in future
- estimate if poss of how long needed
- capital available
- amount of risk client willing/able to take on
- tax issues
The ~ the expenditure that has to be financed as a proportion of the capital available, the ~ the level of risk the client can take on.
- higher
- lower
How would the type of care needed normally be decided?
GP, LA or specialist providers carrying out care assessments.
What is the purpose of an LPA?
It allows the donor to appoint someone that they trust to make decisions on their behalf when they no longer wish to or lose capacity to do so.
What are the 2 forms of LPA?
- health and welfare
- property and financial affairs
Where are LPAs registered?
OPG
If a LT care patient has not given an LPA or EPA then loses mental capacity, what would a relative wishing to take control have to do?
Apply for a Deputyship Order from the Court of Protection.
Name 5 people involved in creating an LPA.
- attorney
- donor
- named person
- certificate provider
- witness
2 important safeguards to the making the LPA process are the named person and the certificate provider.
What do they do?
- chosen by the donor & specified by the LPA to be notified when an application is made to register it (can object to registration if they have concerns)
- selected by the donor, must confirm donor understands the LPA and is not under any pressure to make it
