4 ways to protect your financial freedom

It's much easier to get a policy through your employer, if that's an option. About a third of the nation's workers have access to long-term disability coverage through their jobs, U.S. Department of Labor statistics show (.pdf file). Either their company pays for the insurance, or the worker can buy it at a relatively reasonable group rate. The larger the company, the more likely it is to provide this coverage, said Joseph Luchok, a spokesman for the Health Insurance Association of America in Washington, D.C.

If your employer doesn't offer the coverage, or if you're self-employed, your next best bet is to see whether you can buy a policy through one of the professional or trade organizations to which you belong. If not, you can try to form your own group of at least 10 people to qualify for a discounted rate, Parry said. The insurance agent said he has formed such groups for small-business owners who didn't have enough employees to qualify for group rates on their own.

If your only option is buying a policy on your own, make sure to get enough coverage. Most insurers won't provide benefits that replace more than 60% to 70% of your income, but opt for the highest percentage you can get. You can buy policies that cover you for the rest of your life, but they're often prohibitively expensive; look for one that pays benefits until age 65.

You'll need to go through an agent or broker, so pick one who does a lot of this business and keeps up to date with the insurers' ever-changing policies.

Long-term-care insurance: Safeguard your legacy

Some financial planners say long-term-care insurance can both preserve your assets and ensure that you receive high-quality care. Others say you're better off skipping these policies and using the money to build your retirement funds so you can pay for care directly.

That debate won't be solved here. But here are some things to think about:

First, if you're younger than 50 or have more than $1 million in assets, you probably don't need to worry about this coverage. If you're older than 50 and have $100,000 or more in assets, however, you might want to at least consider it.

Long-term-care insurance covers the costs of serious illness that aren't picked up by regular health insurance or Medicare, the government health program for people over 65. If you can't properly feed, clothe or bathe yourself and need an aide to help you, long-term-care insurance pays the bill.

Long-term care can be expensive: Figure at least $60,000 a year for nursing-home care, and more for care provided at home. Most people need long-term care for two years or less, although 8% of people spend five years or more needing help, according to figures from the Congressional Budget Office.

People who have $1 million or more of assets probably can pay for their own long-term care, although some people buy the policies anyway to ensure that their care doesn't eat up their children's inheritance. Preserving an inheritance is also the reason some people buy policies for their parents.

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At the other end of the economic spectrum are people who are simply too poor to pay for coverage, which typically costs $500 to $2,000 a year. If the premiums cost more than 7% of your gross income, says long-term-care expert Bonnie Burns, you shouldn't even bother with this coverage. If you're truly indigent, you'll most likely end up qualifying for Medicaid, the government program that pays for nursing-home care for the poor.

Experts disagree about when to buy the policies as well. You'll pay less for coverage if you buy it while you're young (age 40 or so -- you usually can't get a policy at a younger age). But the savings may be moot because you're likely to pay for the policy for many more years before you actually need it.

Buy the policy too late -- after 65, say -- and you'll pay a lot more. Monthly premiums for a 65-year-old can be two to three times higher than the same policy for a 50-year-old. Although recommendations vary, the best time to buy long-term-care insurance seems to be between age 50 and 60.

If you're interested in buying a policy, be prepared to do your research. Start by asking your state Department of Insurance for its buyers guide to long-term care insurance. Most states produce one, Burns said. The National Association of Insurance Commissioners also produces a "Shopper's Guide to Long-Term-Care Insurance," which you can order for free.

You might also be able to buy a policy through work. Only about one in eight employees has the option now, but that is expected to grow "due to an aging population and baby boomers who will be increasingly likely to take care of aging parents," said EBRI analyst Ken McDonnell.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston’s award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Updated Sept. 15, 2009

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