CII R05 Long-Term Care Insurance

Question 1

What is 'long-term care insurance' designed to cover?

Accepted Answer

The cost of care in a residential or nursing home, or domiciliary care, when the individual can no longer care for themselves

Answer

Long-term care (LTC) insurance provides funds to pay for professional care — either in a care home or at home — when an individual can no longer perform a defined number of activities of daily living independently.

Question 2

What is a 'pre-funded' long-term care plan?

Accepted Answer

A plan taken out in advance (typically in working life) to fund future care needs

Answer

A pre-funded long-term care plan is purchased while the individual is still healthy and in work, building up funds or purchasing insurance coverage that will pay for care costs if and when they arise later in life.

Question 3

What is an 'immediate needs annuity' in the context of long-term care?

Accepted Answer

An annuity purchased with a lump sum at the point of needing care, providing a regular income to fund care home fees for life

Answer

An immediate needs annuity (also called an immediate care plan) is purchased when care is already needed. A lump sum buys a guaranteed income for life that is paid directly to the care provider and is free of income tax.

Question 4

What is the current (2026) capital threshold below which local authorities in England must contribute towards care costs?

Accepted Answer

£23,250

Answer

In England, the upper capital threshold is £23,250 (as of 2026). Below this level, the local authority must contribute to care costs. Those with assets above this level are expected to self-fund.

Question 5

Which of the following is a key risk associated with pre-funded long-term care insurance?

Accepted Answer

The policyholder may never need care and receive no benefit from the policy

Answer

A major concern with pre-funded LTC insurance is that the policyholder pays premiums throughout their life but may never need long-term care. Unlike life assurance, there is no certainty of a payout.

CII R05 Practice Test

CII R05 Practice Test

CII R05 Long-Term Care Insurance