Long-term care insurance
What is long-term care insurance?
Long-term care insurance policies are no longer sold. These policies provide a regular income to pay fees for a nursing home or for home care for customers who can no longer look after themselves, because of old age or long-term disability.Long-term care insurance policies are no longer sold. These policies provide a regular income to pay fees for a nursing home or for home care for customers who can no longer look after themselves, because of old age or long-term disability.
Long-term care insurance was usually sold face-to-face on an advised basis. The customer would discuss their needs with a financial advisor and may have been given brochures about the cover available.
The advisor will usually have:
- completed a fact find (a form to record information about the customer’s circumstances)
- given the customer some written recommendations in a ‘reasons why’ letter
- provided a welcome pack with policy documents like the insurance schedule and policy wording
There are two types of long-term care insurance policy: immediate care plans and pre-funded care plans.
Immediate care plans
If the customer needed care straight away and didn’t have cover in place, they could pay a lump sum to buy an annuity, which would then be used to make regular payments for their care. This is known as an immediate care plan, and these policies were set up as investments.
Pre-funded care plans
A pre-funded care plan is one where the customer pays premiums into a plan while they are still healthy, to help cover the cost of their nursing home or home care in the future.
The premiums for pre-funded care plans can be paid as a lump sum, annually or monthly. The premium and benefit levels are often reviewable.
As the policies are long term plans, they don’t need to be annually renewed in the way motor or household policies are. But the amount of money being paid in, may not continue to be enough to cover the benefits. So the policies are usually reviewed every five years, to make sure the premiums being paid are enough to maintain the cover.
If at the review the premiums aren’t enough then:
- the premiums may need to be increased to keep the same level of cover
- the benefit level may need to go down
Types of complaints we see
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Claims
Long-term care insurance usually only pays benefits if a customer can’t do a number of activities of daily living – like dressing and washing.
Customers may complain that they even though they have a disability, their claim will only be paid if the specific definitions set out in the policy are met.
We may also get complaints about delays in approving claims. Claims are usually only made when customers are elderly and in poor health. So any delay could cause a financial loss if care needs to be paid for while waiting for a claim decision.
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Mis-sale
Most of the complaints we see are about the sales of these policies.
Customers may complain that:
- the activities of daily living weren’t explained
- they didn’t know the policy was reviewable because this wasn’t explained to them
- the cost of the premiums to maintain the cover has become unaffordable
- the value of the cover is worthless due to reductions in benefits after a policy review
How to complain
If you have a complaint about long-term care insurance, talk to your insurer first. They need to have the chance to put things right. They have to give you their final response within eight weeks for most types of complaint.
If you’re unhappy with their response, or if they don’t respond, let us know. We’ll check your complaint is something we can deal with, and if it is, we’ll investigate to understand what happened and what went wrong.
Find out more about how to complain.
Putting things right
If we think your insurer has done something wrong which has caused you any stress and inconvenience, we’ll work out what we think is fair.
If we find your policy was mis-sold
We may ask your insurer to:
- cancel the policy from the beginning and refund your premiums
- add simple interest at 8% a year from when each premium was paid until the settlement is paid
If the sale was made by an independent financial advisor (IFA) or an insurance broker, we may ask them to pay compensation.
It may not always be in your best interests to cancel the policy, so we’ll discuss all of the options with you.
Delays
If we think you’ve suffered stress and inconvenience as a result of an unnecessary delay in approving your claim, we may ask your insurer to pay you compensation.
Resources
When we’re looking at complaints about long-term care insurance, we’ll use the following resources to help us.