If you have an elderly parent who needs care and who doesn’t qualify for state support, you may need to sell their home or cash in savings. And one of the options is to use that money to buy a care fees plan. So here’s what you should look for.
When would you buy these plans?
You would buy an immediate care plan when your relative needed care. It’s not something you buy in advance in case you need to go into a care home.
SAVVY TIP: You don’t have to buy one — you can just use savings or investments that your parent has, but there’s no guarantee about how long these will last for. Although some people don’t spend long in a care home, others can live there for quite a few years.
The application process
When you apply for a care fees plan (assuming it’s for an elderly relative), the application will go to a processing centre and the provider will send off for your relative’s report from the GP. If they’re already in a care home, the company will ask for a report from the care home as well.
SAVVY TIP: The GP will be chased for the report by the care fees plan provider after ten days and then every five days. The GP gets paid (normally between £120 and £180) to write the report, so it may be worth you chasing it up in between times.
What is the cost based on?
You don’t pay ongoing premiums but normally a one off lump sum to cover the costs. The amount the person needing care will pay depends on:
– Their age when they need care
– Their health
– The illnesses or medical conditions they currently have
– How many activities of daily living they’re able to do (such as washing, dressing and feeding).
SAVVY TIP: Gender used to be taken into account, but since December 2012, EU rules have banned this.
Once the insurance company has this information, it will work out how long it thinks the person is going to live for. It sounds rather grim, but it’s how they calculate how much to charge.
SAVVY TIP: Different providers can take the same information and arrive at a different answer, so it’s worth making sure your financial adviser (if you use one) gets a quote from a number of providers.
Some care fees policies will give a refund of part of the premium if the policyholder dies shortly after taking it out. However, you’ll normally only get back money in the first few months after the policy has been taken out.
Payment of benefits
Different policies will pay out in different ways, and it’s worth being aware that there’s no standard procedure. Some policies will pay out for alterations to the person who needs care’s home, such as for a stairlift or making the bathroom more accessible.
– All policies will make a monthly payment that’s designed to cover the costs of care.
– Some policies will pay the care home direct, others will pay the policyholder.
SAVVY TIP: Some policies may only pay care costs for a limited time, such as two or three years, while others will pay for care for as long as it’s needed.
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