Old Mutual's Paul Roberts debates the role of life cover in helping people meet care costs.
In 2015, dementia was the leading cause of death for females and the second biggest cause of death for males, according to the ONS.
Research from the British Medical Journal expects more than 1.2 million people to be living with dementia in England and Wales by 2040. This is up from 800,000 today.
Those with dementia more often than not move into a care home or are in a hospital. Statistics from Public Health England show that 58.5% with recorded dementia die in a care home and 31.4% die in a hospital.
On this basis just over 700,000 people will have dementia and be in a care home by 2040.
On average people are staying in a care home for four years and they pay about £31,200 a year, according to Paying For Care. So that will mean that 700,000 people will need to earmark on average £124,800 to fund their later life care. Some will pay considerably more.
Despite this, a market for social care insurance has struggled to emerge. Consumers won't buy it.
The industry can try to continue selling the benefits of care insurance, which are unquestionably numerous and valid. But it may find itself bashing its head against a brick wall.
But there may be an easier way.
One route, which savers may not have considered, is utilising a life insurance policy. Some providers have an option which allows you to convert a portion of a life cover policy to cover the cost of care
On Old Mutual Wealth's whole of life policy the disability conversion option is built in. It allows clients to convert some or all of their life cover into a care benefit.
For every £10,000 of sum-assured given up , the policyholder will receive £200 per month in the event they develop a disability or mental incapacity issue covered under the terms.
The conversion entitles the policyholder to up to 50 monthly payments, amounting to four years and two months, which covers the average amount of time someone will spend in care.
The policy is also structured so that benefits can be paused. If the policyholder goes into care but then comes out, the payments can be restarted if they fall ill again.
People can convert up to £150,000 of cover, and the decision to do so can be made up until their 65th birthday.
The flexibility in the policy is designed to allow someone to take their existing life policy and increase their care provision as their life-cover needs decline in later life.
The policy holder will not have to buy another policy or undergo any further medical checks.
We believe there is a role for this kind of flexible life policy in plugging the social care funding gap. However, for this scenario to work, providers who offer these options need to make the public aware and providers that don't need to consider adding them.
Meanwhile, government should also consider offering the public an incentive to plan ahead to cover their care costs.
Later this year it will publish its green paper on the challenge of meeting the cost of social care, a subject the Conservatives promised to address in their pre-election manifesto.
That paper should consider whether tax incentives might empower individuals to take responsibility for funding their own care needs via an insurance policy.
One option might be to extend the tax relief that is applied to immediate needs annuities (INA) to other products used to pay for care. Currently, INAs benefit from income tax relief over the lifetime of the product as they are paid directly to registered care providers.
The upcoming green paper offers an opportunity to pull the UK from its social care crisis. The government needs to ensure it seizes on this opportunity so we can look back on the current crisis as a positive turning point for social care that led to its recovery.
Paul Roberts is head of protection at Old Mutual Wealth
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