Chapter 7 - H&C Long term care

Question 1

Long-term care

Answer 1

• All forms of continuing personal or nursing care and associated domestic services for people who are unable to look after themselves without some degree of support, whether provided in their own homes, at a day centre, or in a state-sponsored or care home setting
• The care provided is designed to treat the results of the condition rather than the condition itself.
• It aims to indemnify the insured for the additional costs of day-to-day living when they are in need of long-term care.
• In some cases, there may be a maximum payment. This means that it does not provide full indemnity

Question 2

How is the cost of long-term care divided up (3)

Answer 2

• Living costs - food, clothing, heating, amenities
• housing costs - rent, mortgage payments and council tax
• personal care - the additional costs of being looked after, arising from frailty or disability

Question 3

What is informal care

Answer 3

That is when care is provided formally or informally (normally by the spouse or children).

Question 4

What is formal care

Answer 4

It can be delivered in many different settings, including the person’s own home, relative’s home, state and privately owned and managed residential homes.

Question 5

What is the aim of Long term care

Answer 5

To provide financial protection when a person becomes unable to look after himself

Question 6

What are the product features of LTCI

Answer 6

LTCI is a product that aims to provide cash funds for long-term care costs or indemnify the insured for the additional costs of day-to-day living when they are in need of LTC.

Question 7

What are the two types of generic cover

Answer 7

• Pre-funded plans
• Immediate needs plans

Question 8

What are the types of benefits that can be paid out

Answer 8

• Single lump sum
• An annuity certain
• A lifetime benefit subject to ongoing disability
• A restricted benefit subject to ongoing disability

Question 9

What are the other benefits usually provided by LTCI

Answer 9

• The plan often provides a fixed number of monthly benefits to cover the cost of any assistive devices (eg. grab rails, bathing seats, …)

Question 10

What are the methods of funding the premiums

Answer 10

• Single payments
• Regular payments
• Restricted regular payments that either stop:
  – at a certain age
  – during a defined level of disability
• Retrospective payment, from the equity released after the sale of the home

Question 11

What are the ADLs that can trigger a claim

Answer 11

WTF DMT

• Washing
• Toileting
• Feeding
• Dressing
• Mobility
• Transferring

Question 12

What are the product variations for LTCI

Answer 12

• Guaranteed terms
• Cash vs Indemnity
• Unit linked

Question 13

What are a few choices of long-term care insurance claims triggers that afford different levels of fund protection

Answer 13

• Protecting the entire investment fund (Both the initial investment from the single premium and the investment growth)
  – If the entire investment fund is protected then all benefits will be paid from the non-unit fund and the unit fund will be returned to the policyholder as a lump sum
• Protecting the initial investment
• Allowing the entire fund to be exhausted ( If the fund is not protected then the unit fund would initially be used to pay the benefits)

Question 14

What are immediate needs solutions

Answer 14

They protect the individuals needing care from their uncertain survival durations, and thereby provide certainty of their capital costs

Question 15

What are the risks to the insurer with respect to LTC

Answer 15

The transfer probabilities in the underlying multiple-state model

Question 16

What are the capital requirements of LTCI

Answer 16

• It can be comparable to those for endowment assurance, or other types of investment contracts, but will depend on the nature of the contract and in particular any guarantees that are given