Age UK has urged insurers to produce new financial insurance products to support the reform of the long-term care system.
It also revealed that many care home residents are being forced to top-up local authority care fees because of funding shortfalls.
The charity believes the coalition government has a once in a generation opportunity to change the way that older people receive care and support in England.
In a highly critical report of the present way long-term care (LTC) is funded and provided, Age UK revealed one of its key principles for reforming included the development of more insurance products.
Its list of key principles suggest the charity would support a public-private partnership model for funding LTC that has been mooted by many in the sector.
In the ‘Care in Crisis; Causes and Solutions' report, the charity said it had drafted 10 key principles 'without which, reform in social care could well stumble and fail to deliver support to England's current and future generations of older people'.
The first priority was for a guarantee of sufficient quality and quantity of care for low income older people, followed by a non means tested entitlement for everyone with care needs, regardless of income.
However, its third primary objective called for: 'New financial products to meet the remaining costs of care for middle to high income older people such as private insurance'.
Other points included; a national legal entitlement to support in order to end the current post code lottery; and alignment with the NHS and other local government services such as housing support.
And Age UK found that public sector commissioners were underpaying for older peoples' care homes by a cumulative shortfall of half a billion pounds.
'We estimate that the average shortfall per resident is £60 per week, rising to £120 per week in South East England,' it said.
'As a result, many care homes are demanding that older people and their relatives ‘top up' their care fees with additional private money, a real injustice as families are forced to subsidise the State's statutory duties.'
'Brave decisions are needed,' it continued.
'Saving the current publicly funded care system will cost two to three billion pounds for older people alone and even then means-testing would remain in place.
'Ideally, Age UK would also like a partial contribution to everyone's care costs as well, so everyone has peace of mind that they will not lose everything on very high care costs.'
