One of the more terrifying financial scenarios anyone can imagine is to be old, sick and broke. To guard against that possibility, more Americans than ever are snapping up long-term care insurance to cover the costs of living in a nursing home or having medical assistance in their own homes. According to the Health Insurance Association of America (HIAA), the number of Americans who have bought insurance for long-term health care has more than tripled over the last decade, from 1.9 million in 1990 to 6.8 million in 1999. But before you rush out to buy insurance, think long and hard about what you need in a policy -- or whether you need a policy at all. Though long-term care insurance is bound to appeal to the likes of aging baby boomers, the policies are pricey and complicated. If you buy a policy at all, you'll want to make sure you get your money's worth.
Instead, Medicaid, the federal health program for the poor, pays almost half of all nursing home costs, either for people who start off low-income or (more worrisome) for those who end up that way, after they've used up their savings paying for care. Residents and their families pay the remainder of the nation's nursing home expenses out of their own pockets -- about a third of the total bill. long-term care insurance hasn't been around 25 years. So how can the actuaries track the use of the product?" Moreover, buyers should be aware that some of the brokers hawking long-term care insurance aren't well versed in the details. "There are a lot of people selling it who aren't up to speed on it," says Gleberman, adding that he wants to understand the product better himself before he begins offering it to clients. The bottom line: If you're interested in long-term care insurance, work with an independent broker who can offer policies from a range of insurers. Also, before buying this type of insurance, focus on taking care of more pressing financial needs such as retirement planning, life insurance and college expenses for your children. Still, long-term care insurance may be a reasonable option for those who would like to preserve their significant assets for their family, rather than dipping into them to cover health care costs. "If you're really trying to preserve the value of your estate for heirs, you may want to consider insuring it with this insurance product. It would be manageable for a high-net-worth individual," says Knaus. Premiums for the policies range widely depending on your age, the level of benefits you want, and how long you'd be willing to cover costs before benefits kick in. According to the HIAA, average premiums for basic long-term care insurance in 1999 were $409 for a 50-year-old and $1,002 for a 65-year old. Most long-term care policies are guaranteed renewable: You can keep renewing the policy, provided you pay your premiums on time and told the truth about your health when you applied for insurance. Although your policy can't be canceled, your premiums could increase. Insurers are allowed to hike premiums on pools of insured people within a given state. (However, an insurer can't raise premiums on an individual policy.)