The Dolans' Guide to Long-Term Care Insurance: Your Top 10 Questions Answered

The costs of health care for everyone are spiraling way out of control, but senior citizens are the hardest hit. Why? Because they need the most health care and the most expensive treatments. Many HMOs are pulling out of senior citizen health care left, right and sideways. Physicians are refusing to take new Medicare patients because they say the government pays them too little to cover the costs.

We don't know where this is going to end, but something has to be done.

At the moment, the best way for you to take control of your or your parents' healthcare needs may be long-term care (LTC) insurance. There's no denying that it will cost your parents (and maybe you) a truckload if they end up in a nursing home. Even now, a nursing home in some parts of the United States costs as much as $100,000 per year. Costs are expected to be as much as $300,000 a year by 2020. And you thought college was expensive!

Although the cost of such insurance may be more than $3,000 per person per year, the price pales in comparison with the cost of long-term care. More and more people are realizing this, and the number of policies has soared in the last 20 years as America grows grayer.

If you're like most people, your mind is reeling with questions trying to figure out what's best for you. To help you out, we've put together a list of the essential questions you must ask and our best answer for each.

Question 1: Who should get long-term care insurance?

Our friends at the United Seniors Health Council and the National Council on Aging have some general guidelines that we think answer this question perfectly. They recommend buying LTC insurance if you or your parents:

• Own assets of at least $75,000 (excluding home and automobile)
• Have annual retirement income of at least $25,000 - $35,000
• Can pay premiums without adversely affecting your lifestyle (or you can pay the premiums without feeling the pinch)
• Can absorb possible premium increases without financial difficulty

For more information, we highly recommend the bible of long-term care advice, Planning for Long-Term Care, published by the United Seniors Health Council and the National Council on Aging.

Question 2: Can I afford the premiums?

Here's a Dolan Rule of Thumb: Unless you have assets of $250,000 or more, including your home, an LTC policy may be too expensive for the coverage that it would provide. If it costs more than 6% to 8% of your annual income in premiums, it's too expensive for you.

However, be aware that the cost goes up as you get older. A policy purchased at age 50, with $150-per-day coverage for life with the coverage beginning 90 days after you are eligible, would cost between $2,500 and $3,000 per person per year. At age 60 the same coverage would cost between $3,000 and $4,000, and at age 70 it would cost around $5,000 per year. Yet once you reach age 65, there is a 40% chance that you will need long-term care at some point.