Don't count on insurers to help you pay for long-term care

Elderly peopleThe government has told us that long-term care reform will help one in eight with the cost of care but the reality is that far more people will be left with huge bills and no means of mitigating the cost.

When it decided to put the £72,000 cap on care costs in place the government was hoping that it would mean the insurance industry would step up to the plate and provide a new insurance product that would cover the £72,000 cost people will have to pay.

There are two problems with this. The first is that people will have to pay out a lot more than £72,000 if one of their family members goes into care. The cap does not cover the 'hotel costs' of accommodation and food, just the actual care of an individual.

The second, and possibly even more serious problem, is that the insurance industry doesn't look like it will be able to fill the gap. Legal & General has already said it has no plans to offer long-term care insurance because it's not commercially viable.

Legal & General is one of Britain's biggest insurers and if it doesn't think it can make a new type of insurance work then it will be surprising if others can. Even if an insurance policy is created it will be so expensive that those who need it won't be able to afford it and those who can afford it won't need it.

The government and Andrew Dilnot, whose recommendations politicians are implementing, thought the introduction of a cap would spur on the insurance industry which would know exactly what they would be insuring.

It doesn't look like it will be the case and shows just how awry a plan can go when the government relies on the private sector to fill the gaps that they should be filling with sensible policy.

The government has realised that it doesn't have the resources to provide adequate care for the thousands that will need it but it cannot hike taxes for those of working age struggling to get by in order to pay for the older generation.

The reforms are the biggest shake-up in care for a hundred years and could be seen as remarkably progressive but I can't help but feel that the policy has fallen at the last hurdle and it is a struggle to see how people will benefit if they cannot make provision for care.

Seven retirement nightmares

Seven retirement nightmares