One in 10 middle-aged and older Americans has long-term care insurance, but that number is likely to grow.
"Boomers who are looking after their parents have started to realize they need to get things squared away for their own care," said Gary Crooms, a financial gerontologist for Senior Information Services.
In 2011, the oldest of 77 million boomers will turn 65 and live an average of 18 more years. As those boomers march toward Golden Pond, some will find they can't care for themselves anymore.
"People should ask two questions as they think about retirement," said Joyce Ruddock, vice president of long-term care insurance at MetLife. "First, 'If the day comes when I can't look after myself, how will my family care for me?' And second, 'How will we pay for it?' "
Nationally, the average cost of a private room in a nursing home is $192 a day, according to the MetLife Mature Market Institute. The average rate for home health aides is $18 an hour.
"Nursing care can wipe out a retirement nest egg in months," Ruddock said.
But financial planners say many people who consider buying long-term care insurance become confused and frustrated. More than 100 companies offer the coverage, and the policies aren't standardized.
"It's such a hodgepodge that people often get overwhelmed and throw up their hands," said Sharon Luker, a certified financial planner with LTC Planning Consultants.
Luker and other financial experts say these are the most common questions asked by prospective buyers:
1. Who should buy it?
Insurance experts say long-term care coverage is best suited for people whose net worth is more than $100,000 but less than $1.5 million, excluding their houses.
Some people considering long-term care insurance try to calculate their odds of needing help.
Half of women and a third of men over 65 will stay in a nursing home sometime during their golden years, Ruddock said.
On one hand, about half of those stays last less than three months and may be affordable. Yet more than a third are longer than a year and capable of wiping out nest eggs.
There's no way to know for sure whether you'll need long-term care.
"If Alzheimer's disease or another chronic illness runs in your family, you'll be at greater risk," said Ana Smith-Daley, a deputy commissioner for the Texas Department of Insurance.
2. When should you buy?
Many financial planners recommend 50 as a good age to decide about long-term care coverage, before your health slips and makes you less insurable.
The younger you are when you buy a policy, the lower your premium will be - although it's also true that the younger you are, the longer you're likely to pay premiums.
These organizations and agencies provide handbooks on long-term care insurance, available on either their Web sites or, by request, through the mail: ¢ America's Health Insurance Plans: www.ahip.org or 202-778-3200. ¢ MetLife Mature Market Institute: www.maturemarketinstitute.com or 203-221-6580.
Still, some industry officials argue it's never too early to consider long-term care coverage.
"Long-term care isn't for just old people," said Karen Ignagni, chief executive of the American Association of Health Plans. "Four of 10 people receiving long-term care are between 18 and 64."
3. How much is enough?
"One size doesn't fit all," Luker said. "Work with a trusted insurance agent who can tailor a policy to your particular needs."
Here are some points to keep in mind:
l Comprehensive coverage? Financial planners recommend a policy that covers not only nursing home care but also assisted living, home health care and adult day care.
l Daily benefit? It should be enough to make up the difference between your income and the cost of your care, Crooms said. Ignagni says a good rule of thumb is $100 per day.
Don't forget to look at the cost of care in the city where you plan to retire, if it's not where you're living today, financial planners say. Costs vary widely across the country.
l Benefit period? Some policies will pay for your long-term care for the rest of your life, though for a princely premium. Since the average stay in a nursing home is 2 1/2 years, most financial planners suggest coverage that pays benefits for at least three years.
But you may want a longer benefit period if your main concern is protecting against Alzheimer's disease, Crooms adds.
l Waiting period? That's the number of days you must receive care before you can draw benefits.
The longer you wait, the lower your premium will be - although the higher your out-of-pocket expenses will be. Luker recommends 30 days.
4. What about features?
Financial planners agree that inflation protection is essential, especially if you're younger than 70.
"If you won't need long-term care for a decade or more, you'll want to take inflation into account when planning what your daily benefit should be," Ruddock said.
Financial planners say a policy should allow for at least 5 percent inflation, compounded annually. A $100 daily benefit that increases 5 percent a year will provide $208 in 15 years.
Also, buy a policy that's "tax-qualified," Smith-Daley said. Your benefits won't be taxed, and you'll be able to take a tax deduction for part of your premiums, assuming your medical expenses are large enough.
5. What's the cost?
Long-term care insurance is a relatively young industry and, until recently, had been beset with steep premium increases as some insurers realized they hadn't charged enough for their early policies.
"But the industry's pricing has stabilized over the last couple of years," Smith-Daley said.
Your premium will depend on your age and your benefits. Be sure you can afford your premium and still have a cushion for unexpected expenses, Crooms said.
"The last thing you want is to discover in several years that you can't pay for your coverage and must drop it," he said.
6. How do you buy it?
More than 5,000 employers offer long-term care insurance, according to the American Association of Health Plans. The group coverage probably will have a lower premium than an individual policy.
But even if your employer provides such an option, look at other plans and compare, Luker said.
"Seek out a trusted agent, especially one who specializes in long-term care insurance, to guide you through the maze of choices," she said.
A long-term care insurance policy is only as good as the company standing behind it.
If you do buy a policy, insurance companies must give you at least 30 days to look over it.
"Be sure it reflects what you think you bought," Smith-Daley said. "If you decide to return the policy during this 'free look' period, your premium will be refunded."