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Betting the Ranch 

Gabriele Axthelm's sister was 49 and single when she had a stroke two years ago. Now paralyzed with permanent brain damage, she is in a nursing home that costs $4,600 a month. "We had to sell her house right away," says Axthelm. "We couldn't even rent it in case she got better." Alzheimer's has put her father in a care facility, and her mother, 80, lives in a retirement center. "They put away money for years," says Axthelm. "They are now living off their savings." 

Such personal tragedy was what it took to get Axthelm, 53, and her husband Lynn, 57, to join some 6 million other Americans who have invested in long-term-care insurance. Their policies, written two years ago, cost a total of $2,800 in annual premiums and provide for five years of benefits should the couple need them as they get older. Explains Gabriele, who has two grown children: "We don't want to have everything taken away from us to get the help we need." 

Aside from death, there are few prospects more frightening than an old age in which your health is poor and your finances worse. The number of LTC policies has doubled in the past five years, as people recognize that Medicaid will cover them only after their assets have been "spent down." LTC insurance is a relatively new type of policy that, at its best, covers many types of extended care: at home with an aide or a family member, in an assisted-living facility, at an adult day-service center or in a nursing home. "With a private, long-term-care policy, you'll get more freedom and options," notes Chris Tschummi, a long-term-care consultant for the United Seniors Health Council, a nonprofit group in Washington. 

LTC insurance is not for everyone though. The rich can pay for their own care. The poor can go on Medicaid. LTC is most attractive to people of means--just not means enough to afford nursing-home costs, which average $56,000 a year. The USHC recommends that LTC-insurance candidates have at least $75,000 in assets in addition to a home, as well as $25,000 in income for singles and $35,000 for couples. 

While some 120 insurance companies offer LTC, the top 10 to 12 companies, which include John Hancock, Conseco and GE Capital, write 80% of the policies. "The policies have moved away from the dreaded nursing home toward community-based care," says Timothy Otto, president of M and O Marketing, an insurance brokerage in Dearborn, Mich. "What most people want is to stay at home." 

That's exactly what Flora Zeman, 71, has been able to do. After she moved to Tamarac, Fla., a friend's husband got Parkinson's disease. "They had no coverage, and she had to give up her house," says Zeman, who bought a lifetime policy just before she turned 65. As a result of diabetes, she now uses a wheelchair. Her LTC policy pays for a home health aide for about nine hours a day. 

The complexity in choosing a long-term-care policy (see box) falls somewhere between learning how to program your vcr and deciphering the tax code. Furthermore, it is extremely hard to predict future needs. Take the case of Sarah and Jesse Besso of Fort Lauderdale, Fla., who are in their 80s. They are glad they took out LTC insurance several years ago, before Jesse was stricken with a rare neurological disease. Their big regret: they chose a two-year policy that is scheduled to end this summer. "We'd be willing to pay to extend the policy if they'd give it to us," says Sarah. "Now we know, but it's too late." 

When to buy is also tricky. "Don't buy too soon," warns Martin Weiss, chairman of Weiss Ratings, a Florida-based agency that evaluates insurance companies. If you buy a basic LTC policy (a $100 daily benefit, four years of coverage) when you're 40, it will cost only about $275 a year--but you could be paying that for 40 years. On the other hand, the same policy will cost about $1,000 a year at age 65 and $4,100 at 79. "The price curve really accelerates in the early 60s," notes Weiss. If you wait too long, the price may be prohibitive--and you may have a pre-existing condition that will preclude coverage. "The best age to buy is about 59," advises financial planner Suze Orman, author of You've Earned It, Don't Lose It. 

Given all the frustration with managed-care plans, it is natural to wonder how well LTC will perform. "If it's not working for claimants, it doesn't have a chance," says Marc Cohen, Ph.D., vice president of LifePlans, a research company in Massachusetts that conducted a recent study on LTC claims, funded by the U.S. Department of Health and Human Services. Out of the 700 claimants interviewed, 86% were satisfied. "It's doing what it's supposed to," concludes Cohen. Those who were having trouble collecting tended to have older policies designed for a different health-care environment. 

Until recently, more than 80% of LTC insurance was bought by individuals at an average age of 67. That will soon change. Some 2,000 employers--from American Airlines to SmithKline Beecham, as well as some state governments--are offering the insurance to employees, who buy, on average, at age 42. LTC insurance will get a huge boost next year when the Federal Government will offer policies to some 20 million eligible federal employees, retirees and their families. 

Still, LTC insurance remains a hard sell. "It's a subject people don't want to talk about," says Susan Feld, an agent for LTC Insurance Services of Bellevue, Wash. "I will ask a man, 'Do you realize that the chances of your wife's needing long-term care are 1 in 2?'" Compare that with the odds of making a catastrophic insurance claim on a home (1 in 1,200) or auto (1 in 250). When deciding whether to buy long-term-care insurance, the question becomes very personal: Are you feeling lucky?