Partnership, a UK provider of long term care insurance, has launched its Care Plan Payment Option which provides a way to pay for care fees without the need to sell the family home.
Chris Horlick, managing director of care at Partnership, says: “For many people, the most realistic way to fund care home fees is through the sale of the family home. Partnership’s new lending product, the CPPO, has been developed to enable a property owner to meet care costs, while maintaining the peace of mind which many associate with property ownership.
“The CPPO also gives the property owner the flexibility to rent out their property while they are in care, or, let a member of their family or friend live there for the duration of their stay in care, subject to Partnership’s agreement.”
Whilst the property must be vacated at the time the CPPO completes, the loan enables the property owner to rent out the property once the CPPO loan has completed. There is also the option to return home should the services of a care home no longer be required.
“We believe this is another welcome development in the care insurance market, as the sector is expected to grow significantly to reflect the predicted increase in the number of elders in our society,” Horlick says.
The CPPO loan is a form of mortgage with interest being charged on the outstanding balance.
Interest is calculated daily and added to the CPPO loan monthly. The CPPO loan and all interest and charges are payable upon the sale of the home at death, or, if it is sold beforehand. No repayments are made during the life of the CPPO loan.
The fixed rate of interest is 6.99 per cent. This is based on the typical rate for equity release products in the market.
The CPPO loan can be repaid either partially (subject to a minimum amount of GBP5,000), or in full at any time, without any early repayment penalty.
The CPPO loan is used to purchase a Partnership Care Plan, which in turn provides a level of guaranteed income for the life of the policyholder. If income payments are made directly to a registered care provider, the income is tax free.
Upon death the property will be sold and the loan, together with interest and charges, will be repaid from the sale proceeds.
The longer the CPPO loan runs, the higher the balance will become. If there should be insufficient funds from the sale of the home to repay the CPPO loan, Partnership would provide a no negative equity guarantee. This ensures that the repayment required to pay off the CPPO loan will never be greater than the proceeds from the property sale.
A six month money back guarantee is included in the CPPO loan, so should death occur within the first six months of taking out the Care Plan, a percentage of the Care Plan premium will be offset against the CPPO loan, thereby reducing the balance due.