This new ILC-UK/Cass Business School report explores different methods of funding long term care insurance. 

With the dramatic increase expected in the number of older people requiring care, and the tightening of public funding, individuals will be increasingly expected to contribute to and plan for their own care in later life. However, history shows us that people are very reluctant to save for their care to the extent that there are no longer any providers of pre-funded long-term care insurance products in the UK to help address this problem.

‘Flexible and affordable methods of paying for long term care insurance‘, a joint ILC-UK and Cass Business School report, considers a product which is a disability-linked annuity that provides benefit payments towards the cost of both domiciliary and residential nursing care. It investigates four different methods of payment for this product:

• a one-off upfront lump sum premium
• a regular monthly or annual premium which ceases if and when the benefits are triggered
• a payment after death or entering long-term residential care using the value of the home upon sale
  based on a percentage of the housing equity
• a payment after death or entering long-term residential care using the value of the home at an agreed
  monetary amount

The report argues that this flexibility would allow individuals to have control over the timing of their payments to fit around their lifestyle. 

Baroness Greengross, Chief Executive, ILC-UK said:

The dramatic increases in average life expectancies witnessed throughout the 20th , and early 21st centuries are one of our society’s greatest achievements, and should rightly be celebrated. However, whilst we are living longer, we are also spending a greater proportion of our lives in ill health.

This report will surely be welcomed by insurance providers and public policy experts as we all consider how best to engage and serve a rapidly ageing population with diverse asset/wealth holdings. Through exploring flexible approaches to funding long-term care insurance which account for the many ways in which individuals might fund long-term care, we might yet be able to provide long-term care funding solutions which preserve quality of life both now and in the future.

Authors: Les Mayhew, Ben Rickayzen and David Smith