No long-term-care insurance? Uh-oh

For some people, the need for long-term care comes suddenly. Randy Klein was in his 40s and healthy when he and his wife, Carol, went boogie boarding while visiting Maui. It took only one wave, driving his head into a sandbar, to change his life. He was paralyzed from the neck down, and he needs care 24 hours a day. That's more than Carol can provide while she raises their four children and runs their business.

Randy's in-home care costs up to $75,000 per year. Fortunately, the Kleins had purchased long-term-care insurance six months before the accident.

"Having long-term-care insurance has given me choices," Carol says. "Because of this protection, I am able to have someone assist me with his care. I am able to be a mother to my children. I am able to continue to live a small piece of my own life."

How to get insurance

You can generally buy insurance from an agent or a broker. An agent works for one company and will usually, but not always, recommend that company's products. A broker represents many companies and theoretically can choose the best product for you.

Harley Gordon, an attorney and the author of "In Sickness and in Health: Your Sickness -- Your Family's Health," says the person's competence is more important than whether he or she is an agent or a broker. Ask your accountant or other professionals for a recommendation, and ask the professional about training, experience and professional designations.

You might also check out ElderLawAnswers, a clearinghouse of information on attorneys, agents and brokers in the business.

Long-term-care insurance is expensive if you wait until you're close to the time you're likely to need it. Compared with the potential cost of care, however, it's a deal. Metcalf, of HealthPlan Services, says a single 55-year-old can expect to pay about $1,075 a year for long-term care insurance. Married people pay less because they tend to take care of each other longer. If you ever need care in a nursing home, consider this: In 2006, the average cost was $66,795 for the year, or $183 per day.

Here, according to Metcalf, are approximate annual premiums for long-term-care insurance:

Age	Single	Married
55	$1,075	$655
65	$1,923	$1,292

If you can't afford that much, consider buying a policy with a lower daily benefit and maximum total benefit, and getting only the riders you really need.

Standard provisions

Before 1993, long-term-care insurance had no government standards. Policies were hard to understand and often had riders that seemed skewed in favor of the insurance companies. For example, some companies canceled policies after a claim or didn't cover certain diseases such as Alzheimer's. Today, most states follow coverage standards developed by the National Association of Insurance Commissioners.

The following provisions are standard:

• A 30-day free look. You can cancel your policy at any time during the first 30 days and get all of your money back.

• Guaranteed renewability. A company cannot cancel your policy as long as you make your payments.

• An unintentional-lapse provision. An insured person whose faculties are slipping may forget a payment or two. If the missed payments are due to a cognitive or physical impairment, he or she has up to six months to catch up and reinstate the policy.

• Benefit triggers. Benefits may start when you need help with at least two "activities of daily living," such as eating, getting dressed, moving around or using the bathroom; your memory or thinking ability reaches the point that you need substantial help; or you need help for a medical reason.

• Home modification. You can get a lump sum to make your home accessible. For example, you may need wheelchair ramps or grab bars.

• Respite care. This takes over when your home caregiver needs to go somewhere or just needs a break.

• A waiver of premium. After you become disabled, your premium is waived.

• Exclusions. Most plans do not cover self-inflicted injuries, alcoholism or substance abuse. Coverage of mental-health issues varies; check your policy.

Additional riders

Remember when $10,000 a year was a decent salary? That wouldn't go far today.

Likewise, you can buy a generous-sounding long-term-care policy today and find it completely inadequate when you need it. The solution is to include an inflation-protection rider in your plan.

You can get simple- or compound-inflation protection at a predetermined rate or tied to the Consumer Price Index. Consider these points:

• Simple-inflation protection increases your daily benefit amount by the same flat amount each year. For example, a daily benefit that starts at $100 could increase by $5 a year.

• Compound-inflation protection increases every year based as a percentage of the prior year's benefit amount. This makes a huge difference in your protection over a course of years.

• Inflation protection based on the Consumer Price Index is probably the safest bet. If the U.S. sees double-digit inflation again, as it did in the 1970s, your benefit with this rider is likely to keep up with the cost of care.

If you are young and don't choose inflation protection, inflation can render your plan almost useless by the time you need it. The older you are, the less you need to worry about inflation protection.

Continued: More riders to consider

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