A Look at Long-Term Care Costs

Seventy percent of Americans haven't planned for their long-term care needs in retirement, according to Employee Benefit News. What's more, 70% of people over age 65 will require that care, whose cost is high and rising.

Indeed, the average annual cost of a private nursing-home room in 2008 hit $76,285, according to the Department of Health and Human Services. Accounting for 3% annual inflation, that year of nursing home care will cost nearly $150,000 by 2030. With the average stay reaching almost 2.5 years, you're looking at a total price tag of about $400,000.

Given those numbers, it's no wonder that many people are pondering buying long-term care insurance, or LTCI. LTCI policies can cover the cost of extensive care, leaving your savings largely untouched. But they can be a waste of money for those who don't need care, can't keep up with premiums or don't get an appropriate policy.

Here's a primer on LTCI, along with information to help you determine if it's right for you.

What is LTCI?

LTCI covers nursing homes, assisted-living facilities, adult day-care centers, hospice and at-home care once you can no longer perform some of what insurance companies call "activities of daily living," or ADLs such as dressing, bathing and eating, due to physical or mental impairments.

Typically, benefits cover a daily maximum (usually $50-$500) for a set period of time (usually six months to life). Most policies are sold by large insurers such as John Hancock, Northwestern Mutual Life Insurance, MetLife and Prudential.