Long-Term Care Insurance: A Growing Concern

As people live longer and retire earlier, the demand for long-term care insurance is expected to rise sharply. However, to date, the market has been slow to take off, with only a few insurance companies offering policies and even fewer people seeking coverage. Commercial Union, a leading provider of long-term care insurance, has cut its premiums by up to 23% in an effort to make the product more attractive to potential customers.

Commercial Union points out that the number of people in Britain aged over 85 will increase by 50% in less than 20 years, while the number of working taxpayers supporting the elderly will fall sharply. This could lead to a significant strain on the welfare state, with 25% of the population potentially supporting the other 75% in just over 50 years.

The average cost of nursing-home care is around £17,000 per year, rising to £22,000 in some areas, while just two hours of nursing care per day at home can cost up to £5,000 per year. In contrast, the state pays a maximum attendance allowance of £45.70 per week to those over 65 who need day and night care at home. However, this is only available after six months, and people with savings over £8,000 are not eligible for residential care.

Long-term care insurance aims to fill this gap, providing a monthly premium in exchange for meeting the costs of providing a home help, specialist equipment, or full-time residential care. Commercial Union's Well-being policy offers two levels of cover of up to £30,000 per year, while other companies such as PPP Lifetime and Prime Health offer similar products.

However, many people are still hesitant to take out long-term care insurance, with some believing that the state will automatically provide for their care needs. In reality, the cost and responsibility for long-term care falls squarely on the shoulders of the individual's family. Barbara Hastilow, a 63-year-old widow, took out Premier Cover on the Well-being policy to provide for her care needs, while Alfred Graves, a 75-year-old, feels bitter that he has been forced to safeguard himself against illness in old age due to inadequate state provision.

Key Takeaways:

• The demand for long-term care insurance is expected to rise sharply due to an aging population and increasing need for care services.
• The average cost of nursing-home care is around £17,000 per year, rising to £22,000 in some areas.
• Just two hours of nursing care per day at home can cost up to £5,000 per year.
• Commercial Union has cut its premiums by up to 23% in an effort to make the product more attractive to potential customers.
• Long-term care insurance aims to fill the gap between state provision and individual care needs.
• Barbara Hastilow, a 63-year-old widow, took out Premier Cover on the Well-being policy to provide for her care needs.
• Alfred Graves, a 75-year-old, feels bitter that he has been forced to safeguard himself against illness in old age due to inadequate state provision.
• Commercial Union's Well-being policy offers two levels of cover of up to £30,000 per year.
• PPP Lifetime and Prime Health offer similar long-term care insurance products.

Statistics:

• The number of people in Britain aged over 85 will increase by 50% in less than 20 years.
• The number of working taxpayers supporting the elderly will fall sharply.
• 25% of the population could be supporting the other 75% in just over 50 years.
• The maximum attendance allowance is £45.70 per week.
• The average cost of nursing-home care is £17,000 per year.
• Just two hours of nursing care per day at home can cost up to £5,000 per year.
• Commercial Union has cut its premiums by up to 23%.

Sources:

• The Sunday Times, 1994
• Commercial Union press release, 1994
• PPP Lifetime press release, 1992
• Prime Health press release, 1994
• Hambro Guardian Assured Care press release, 1994
• Pearl Assurance press release, 1994