Learn the Ins and Outs of Long-Term-Care Insurance

Most older Americans have no insurance to cover the incredibly expensive long-term care often necessary when chronic illness or disability strikes late in life. Nursing-home costs alone can run $70,000 to $100,000 a year. At the most expensive centers the bill can approach twice that much.

Long-term care usually involves nonmedical help with such daily tasks as bathing and dressing. Health, life and disability insurance won't pay for that. Medicare will cover very little. But long-term-care insurance will.

People who don't have coverage have to pay out-of-pocket until they run out of money and become eligible for Medicaid. At that point, you're basically letting the government pick a nursing home for you.

Annual premiums can range from $1,000 to $6,000, depending on the level of care you insure and your age when you buy the policy. Premiums start out at relatively modest levels for those in their 50s and then rise steeply, making the insurance costly or even prohibitive. Buying at a younger age locks in the lower rate.

How the policies pay -- or don't pay

Generally, benefits become available once you meet three of the following conditions:

You are unable to perform two of six basic activities of daily living (such as bathing or dressing) or you show signs of severe cognitive impairment, such as those associated with dementia.Your doctor or other health professional certifies that your condition is expected to last at least 90 days.You pay for long-term-care services for the number of days in your waiting period.

Then, depending on the beneficiary's condition and terms of the policy, care proceeds through several stages.

Skilled care. This is medically necessary care provided by licensed professionals, such as nurses and therapists, working under the supervision of a doctor.

Intermediate care. This also requires supervision by a physician and skilled nursing care, but it is needed only intermittently.

Custodial care. This covers nursing home services. Benefits cover mainly room and board plus payments for assistance with the activities of daily living.

Home health care. Depending on the policy, benefits for home health care may range from homemaking and chore services to occupational therapy and laboratory services.