Black balloons and over-the-hill jokes are common elements of 50th birthday celebrations. But along with the dark humor comes a realization that you're entering the "second half" of life. You wonder: How well will I age? Will I be able to live independently when I'm old?

You can't know the answers to such questions in advance. But you can plan to boost the odds you'll be comfortable and content in your elder years. One piece of that planning is to consider long-term care insurance. Fifty isn't too young to start thinking about it. Here are some questions to consider.

Long-term care
includes much more
than nursing homes.
What is long-term care, and what are my chances of needing it?
To many of us, long-term care means "nursing home"--a destination we hope we don't reach. But it includes much more: at-home care, assisted living facilities, adult day care, and so on.

"There are numbers batted around that say the average stay in a nursing home is 2.8 years and that the chances are four in 10 you'll need a nursing home," says Gregory Seal, a certified financial planner in Denver. "But there's no statistic yet that gives us the odds of using the full continuum of long-term care or any part of it, and to what duration." Insurance can cover all or part of the costs of whatever long-term care you eventually require.

What options do I have besides insurance?
You could pay your long-term care costs out of your own pocket. But with nursing home costs averaging $40,000 to $60,000 a year and climbing, and at-home care costs running even higher, the do-it-yourself option is impossible for many.

Or you could rely on Medicaid, the program funded jointly by state and federal governments. State rules vary, but usually you must have depleted most of your assets to qualify for Medicaid.

A key question is:
Can you afford it?
Should I buy this insurance?
If you're somewhere between rich and poor, long-term care insurance might be a wise choice. Still, it's not for everyone in the middle-income range. A key question is: Can you afford it?

"Recently I had a woman come in who was in a state of panic over long-term care," says Michael Crifasi, a certified financial planner in Atlanta. "Her biggest priority was to get a long-term care policy. But, as far as I was concerned, she didn't have enough money to live on. For me to take another $100 to $200 a month to pay for a policy would have been foolish ... I can't see destroying the quality of your life today because you might have a problem later."

Another aspect to consider is your net worth. Do you have significant assets--say at least $75,000 excluding house and car--that you want to leave to heirs? Long-term care insurance can protect those assets, so you won't need to drain everything you have someday to pay for long-term care.

Thus, opting to buy long-term care insurance is "an economic decision," emphasizes Seal, "not just a decision on an insurance product in isolation of everything else."

What does it cost?
Premiums vary depending on your health condition, family health history, type of coverage, and age, to name a few factors. You'll come out ahead by starting younger, even though you'll pay premiums for more years.

For instance, premiums on a policy covering both nursing-home and at-home care run in the range of $500 to $1,500 a year, if purchased at age 55, according to Eric Shulman, president of the United Seniors Health Cooperative in Washington, D.C. If you start at 65, the same policy would cost from $900 to $2,500. The premium range jumps to $1,500 to $6,000 annually if you wait until you're 75.

If you wait too long, until the time comes when you're almost in need of long-term care, "you'll probably be either uninsurable [because of your health condition] or it won't make sense because the premiums will be so high," Shulman explains.

When is the best time to buy?
The time to look into buying long-term care insurance is "when you've arrived at a point in life where you have some extra income that you don't need," Crifasi says. "You've fully funded your individual retirement accounts, your savings are going well, and you have all the other insurance you need: disability, major medical, and life."

If you can afford to do so, start a policy even before age 50, Crifasi advises, who has bought policies for his two children. "One was in an automobile accident and fortunately healed. But I could have had to take care of that child for the rest of my life," he notes, citing the twist of fate dealt to actor Christopher Reeve.

If you buy at a younger age, stick with it. Experts say all too often consumers buy a long-term care policy, hold it for a few years, and then let it drop, figuring they're still in good health and maybe don't need it after all. That's a mistake, Shulman says. "Once you begin paying the policy," he notes, "if you're not making a commitment to it for the duration, you could be wasting a significant amount of money."

What do I look for in a policy?
First, assess whether the company behind the policy is likely to be around when you'll need long-term care, decades from now. Select a company rated at least "A" by sources such as Standard & Poor's. When choosing coverage, you'll need to consider:

  • Daily benefit--This is the amount you'll receive to cover daily care. You might opt for 100% coverage. Or, if you can afford it, you might choose to pay for a portion of daily costs yourself, say 20%, thus reducing your premiums.
  • Benefit period--Premiums rise as the benefit period lengthens. Some experts recommend going with longer coverage and trimming the daily benefit to keep premiums down. For instance, it may cost about the same to get a $100/day benefit for five years and an $80/day benefit for a lifetime. "I would recommend the lifetime policy," Crifasi advises, "if you can fund that additional $20/day out of your own income. The only time I back off lifetime coverage is when the cost is prohibitive."
  • Elimination period--You pay costs yourself during this time, before benefits kick in. If you have money to cover you for a while, you'll save on premiums.
  • Inflation protection--When you're buying a policy at a younger age, experts recommend you get an inflation protection rider of 5% a year compounded. Then daily benefits will be in sync with costs years from now.

Where can I get help to choose wisely?
Talk to your local Agency on Aging office, your state's Health Insurance Counseling and Assistance Program, or a certified financial planner who's familiar with long-term care insurance.

©1998 Credit Union National Association, Inc.