Most people know about the type of health insurance that pays doctor and hospital bills, yet few of us know about insurance that provides long-term care in a nursing home or at home.

Long-term care includes medically required nursing care and any other assistance you’ll need if you develop a chronic illness or disability that leaves you unable to care for yourself over an extended period of time.

A recent study by the American Association of Retired Persons (AARP) reveals that people underestimate the cost of long-term care, and they often don’t know how they will pay for it. In fact, about three in 10 believe they have insurance that covers the costs of long-term care, even though estimates show that only about 6 percent of American seniors have actually purchased such insurance. This indicates that many respondents confuse long-term care insurance with other types of coverage.

If you’ve never thought about what would happen to your financial wherewithal if you or your loved ones suddenly were in need of long-term care, consider this:

• The HIAA (Health Insurance Association of America « www.hiaa.org) estimates that by the year 2005, the number of Americans needing long-term care will increase to 9 million « up from 7 million today and by 2020, that number will grow to 12 million.
• One year of care in a nursing facility could cost from $40,000 to $80,000 according to a 1999 study by the Center for Long-Term Care Financing.
• Medicare pays only 8 percent of long-term care costs, according to research findings by the American Council of Life Insurers. Individuals pay nearly 50 percent of these costs.

   One solution to managing the high cost of long-term care is to transfer the risk from your personal savings to insurance. By doing so, you can accomplish four important objectives:

• Preserve your assets
• Maintain your independence and control
• Relieve your loved ones of financial and emotional burdens
• More consistently manage your budget.

   Long-term care insurance is relatively new to consumers – it was first introduced in the 1980s as “nursing home” insurance. Since then, a lot has changed, and this type of insurance now covers nursing care and in-home care. In addition to professional care from a therapist or nurse, today’s plans cover services such as meal preparation, housekeeping, transportation and personal laundry. Special equipment for your home including ramps, lift and bath chairs, and respirators also is covered.

The decision to purchase long-term care insurance requires careful consideration. Under no circumstances should you purchase this insurance if the premiums will cause you a financial hardship or reduce your standard of living. In general, if you are an individual or couple with liquid assets of $50,000 to $1 million, or total assets of $200,000 or more, this is a planning strategy you should investigate.

Before making a final decision about long-term care insurance, here are several “shopping hints:"

• Know the company you are considering. The Washington State Insurance Commissioner’s office is a great resource for information about insurance companies that offer long-term care insurance. Visit the Insurance Commissioner’s Web site at www.insurance.wa.gov for a consumer’s guide to financing long-term care, a list of authorized long-term care insurers for Washington, planning tips for long-term care insurance and a shopper’s guide to long-term care insurance. In addition, Washington residents can e-mail the Insurance Commissioner’s office with questions at cad@oic.wa.gov.
• Check with several companies and agents. It’s always a good idea to shop around whenever you’re making a major purchase such as long-term care insurance. Develop a list of companies that offer long-term care insurance and compare their rates using resources such as Duff & Phelps, Moody’s Investor Service and Standard & Poor’s Insurance Rating Services. A fee for rating information may be charged, so ask first. Also, many employers now offer long-term care plans as part of their company benefits packages.
• Understand the policies and make “apples to apples” comparisons. Policies can vary greatly, so be sure to get the same information from each agent or company you contact. Information you’ll need includes the types of facilities and services covered, criteria to qualify for benefits, daily and total coverage limits and the cost of the premium.
• Prepare for inflation. Look for a policy that automatically adjusts every year for inflation. Your $100 daily benefit in today’s dollars may won’t buy as many services several years down the road.

   Finally, don’t be pressured into making a quick decision. Take the time you need to get all your questions are answered and to know that you’re making the right choice of agent, company and policy for your long-term care needs.