Without conducting thorough research, funding care can be complicated to navigate as choosing which care option to pursue. Whether you are receiving extra financial assistance for your care or are self-funding, being aware of what is available to you can save you money.
For individuals who are self-funding their care and are not eligible for financial support, an immediate needs annuity might be worth exploring. We will uncover what exactly an immediate needs annuity is and how it can help with the costs of care.
For more information on financing care, take a look at our financing and funding care guide.
What is an immediate needs annuity?
An immediate needs annuity is an insurance policy that individuals in need of care can purchase. These policies provide a source of income to help cover care fees. After paying out a lump sum to an insurance company, the buyer receives regular payments for the care service of their choosing for the rest of their life. You can buy an immediate needs annuity from the age of 60, and there is no maximum age limit.
Depending on the policy you purchase, the income can either remain at a set amount or increase each year by a rate you agree upon. The income provided by this policy can be paid either to a home care agency or to any care home facility.
How does an immediate needs annuity work?
There are two main types of care needs annuity, which vary regarding when payments begin. Immediate care needs annuities are the most purchased type and are ideal for individuals who require immediate assistance with care costs.
The other type is a deferred care needs annuity, which is aimed at those who suspect that they might need support with care costs in the near future. For most policies, the care plan typically starts from one to five years after the annuity is purchased.
Bear in mind that the care needs annuity plan is not guaranteed to be able to cover all care costs. You will need to be prepared to pay a sum of money to bridge the gap between the value of the annuity payment and the total cost of care per year. This is especially important to note as the cost of care increases with inflation. With some immediate needs annuity providers, you can opt for yearly payments that increase in line with the care service fees.
Furthermore, if the insurance company is paying a registered care provider directly, it can be paid tax-free. This is different to traditional pension annuities, in which you would have to pay tax on the payments from the insurance company, even if the money is used to pay for care.
Benefits of an immediate needs annuity
Immediate needs annuity is an insurance product that can be used by individuals self-funding long term care.
The benefits of using an immediate needs annuity for funding care include:
- Provides peace of mind for those worried about paying for long-term care
- It may help you cap the costs of your care
- Often protected from loss and risk
- Once purchased most policies have a cooling off period if you change your mind
- Should an individual pass away before the total sum has been used up, the excess goes to their beneficiaries.
Not all insurance providers offer immediate care needs annuities.
Here are the main providers of care needs annuities in the UK:
- Aviva – Immediate Lifetime Care annuities and Deferred Lifetime Care annuities
- Legal & General – Lifetime Care Plan for over 60s
- JUST – Immediate Care Plans and Deferred Care Plans
It may be advisable to seek the assistance of a financial advisor to help you decide which insurance provider and service are best for you. Once you have made your decision, the next step is to undergo a medical assessment. The total amount an insurance provider will pay out is determined by the findings of the medical assessment as well as additional factors, such as your:
- Age
- Health status
- Medical history
- Provider’s annuity formula
These factors will be analysed to determine your annuity rate. If you are happy with the rate and have agreed to the terms, you will be required to pay a lump sum to the insurance company. They will then pay out a monthly income for the rest of your life, or they can pay directly to your care service provider.
How Country Cousins can help
Live-in care services can be funded using an immediate needs annuity if you choose to go down the self-funding route. This means you can rest assured that care costs are covered and that you or your loved one will receive affordable, quality care. At Country Cousins, we provide a selection of live-in care that can be self-funded or even financed as part of a scheme or assisted via benefit entitlements.
With more than 60 years of experience, we have extensive expertise in a wide range of home care services. You can trust us to help you find the most suitable carer to support your loved one in line with their personal preferences and wishes. For more information on selecting live-in care for you or your elderly loved one, check out our guide to live-in care.
Talk to our team today
If you require live-in care for you or your loved one, get in touch with us at Country Cousins today. We are the UK’s longest-serving introductory care agency, having provided compassionate care to people in their own homes since 1959.
Give us a call today on 01293 224 706 should you have any questions about home care. Our experienced team is on hand to help from Monday to Friday, 8 am to 6 pm. Alternatively, contact us through our online enquiry form.
