New life insurance policy helps cover the cost of care

New life insurance policy from Vitality Life allows you to access payout early to help pay for care.

A new life insurance product has been launched which allows policyholders to access some or all of their payout early, should they suffer a serious illness in later life.

Lifestyle Care Cover is available from VitalityLife (what used to be PruProtect), and is designed to give people a little extra financial flexibility should they develop dementia or Alzheimer’s and need to pay for care.

When you take out the policy, you can choose a certain amount (up to 100%) of the cover which you can access before you die in order to pay for support in later life.

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How it works

Here’s the example that VitalityLife has put together on just how Lifestyle Care will work.

Zoe takes out £100,000 of life cover, and wants 50% to be available in case she needs support in later life.

She develops dementia in her 60s. In the early stages of a disease like this, or Alzheimer’s or Parkinson’s, the policy will pay out 20% of the money that she wanted to be available early. So in this case that works out at £10,000.

If things get worse, and she is unable to do three of the following six daily activities on her own (as observed by her doctor) then the rest of the portion allocated to Lifestyle Care will be paid out.

• Being able to get in and out of the bath or shower to wash herself.
• Getting dressed/undressed without help including artificial limbs, braces or any other surgical appliances she may use.
• Getting between rooms on a level floor.
• Feeding herself if the food has been prepared.
• Getting in and out of a chair or wheelchair.
• Using the toilet.

You can actually choose to allocate 100% of your cover to be open to early access, with a reinstatement option which means that even if the full amount had been drawn down, the full value of the policy would again be paid out on death. Obviously, this will cost you more in terms of monthly premiums.

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What does it cost?

If a 45-year-old wanted to take out £50,000 of whole-of-life cover, with no LifestyleCare included, via VitalityLife it would cost them £34.16 a month.

If they wanted to have all of that money available early through LifestyleCare, the premium would rise to £45.08.

And if they wanted the reinstatement option too, to ensure that the full amount was paid out after death, even if they had already fully drawn down their cover to cope with care costs, that premium would rise to £67.29 a month.

However, you can cut that cost thanks to Vitality Optimiser. The firm wants to push healthy behaviour in order to reduce the likelihood of suffering one of these illnesses, so if you make healthy lifestyle choices (for example going to the gym, getting the flu jab and cutting your cholesterol to a healthy level) you get rewarded.

By opting for Vitality Optimiser on your policy, you basically promise to look after your health in return for lower premiums. So you get lower premiums in the first year, then every year after that your premium will vary depending on how much effort you put into meeting the healthy living programme. Make no effort and your premiums go up by 2% a year, but make enough effort and you’ll cut your premiums by 1% a year.

And this option means that our 45-year-old example would pay just £30.05 a month, or £43.38 a month if they want the reinstatement option too.

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Whole-of-life cover vs term cover

The two most popular forms of life insurance are level term and decreasing term. The key word with both of these is ‘term’ – you are only covered for a set period. So if you take out a level term policy which will pay out until you are 60, and then die at 61, your family won’t receive a penny. That’s fine if your main concern when taking out life insurance is ensuring that your death won’t leave your loved ones struggling to meet the mortgage, for example.

But if you want to ensure that your loved ones get something when you die, no matter when that is, then whole-of-life cover is likely your best bet.

For more, read Whole-of-life insurance cover: pros and cons.

Meeting the cost of care

How we meet the cost of care we need in our final years is one of the biggest questions we face as a nation.

While the Government has implemented plans to limit how much we have to spend, the fear is that it simply isn’t enough. As a result, it’s likely that more and more specialist protection products, like Lifestyle Care, will begin to pop up.

We can’t afford not to think about how we will pay for the treatment we need.

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More on household money:

Why life insurance can cost under £5 a month

Life insurance: how much do you really need?

Health insurance policy that will protect your extended family

Why you must make a financial plan