Reuters Money

Toddi Gutner is a contributing writer for The Wall Street Journal and is a former associate editor for BusinessWeek. The views expressed here are her own.

Andy Schupack and his wife hadn’t given long-term care (LTC) insurance much thought until they realized what could happen without it. Some relatives had to do a reverse mortgage for financial resources and others had to move in with family members when they got older, but neither ended up getting the proper care as they aged. To avoid ending up in a similar situation, Schupack, 57, decided to explore long-term care insurance.

He isn’t alone. About eight million Americans have LTC insurance; some 325,000 are new policyholders who bought their coverage in 2009. That number is only expected to rise as the 77 million aging baby boomers begin to look out into the future and consider the care they will need during the last years of their lives. Even so, the industry is changing as insurers, including MetLife, are exiting the business — and experts are concerned that policies will disappear or become unaffordable to keep.

For consumers like Schupack who have decided they want long-term care coverage, questions remain about when is the best time to buy it, for how long should coverage exist, what your policy should include and even whether buying a policy is the right decision at all. Unfortunately, the answers aren’t easy, but there are guidelines that can help make the decision less challenging.

The typical time to buy is between 50 and 60 years old. “This is when you’re getting to the end of your working years and you can pay off the premiums by the time you are 65,” says Nick Erin, a long-term care specialist at Mass Mutual. “Most companies have a 10-year pay period.”

Many websites have cost/benefit calculators that can help you figure out the right time to buy.  In some cases, however, “people don’t really need the product,” says Erin. LTC insurance is for income protection and sometimes “Medicaid is a more viable option for people who don’t have an estate,” he says.

As you would expect, your health will also determine your insurability and your cost. A 50-year-old who develops a chronic mid-life health problem like multiple sclerosis can be locked out of a policy. “I get one call a week from people who waited too long to get coverage,” says Rhonda Gimbel, an insurance agent for LTC Professional Insurance Group. The problem is people don’t look at the planning properly. An estimated 20 percent of applicants are turned down due to health reasons.

Indeed, the cost of long-term care insurance rises each year as you age. “The difference between years can be 2 percent to 9 percent and the older you are, the greater the increase in cost,” says Gimbel. For example, the average annualized premium for individual between 45-54 year-old is $1,900. That number jumps to $3,250 per year for someone 65 and older, according to the American Association for Long-Term Care Insurance.

If you buy a policy at a younger age, you can also qualify for preferred health discounts of up to 10 percent.  An estimated 62 percent of applicants between the ages 40-49 and 46 percent of the applicants between the ages 50-59 qualified for good health discounts in 2009. That percentage fell to 38 percent for ages 60-69. There are also marital partner discounts.

Your policy benefit should be based upon the current cost of care, and include some inflation protection, because long-term care costs are increasing. “For example, in 2010 the national median rate for a private nursing home room is $75,190,” says Sam Fleet, president of AmWINS Group Benefits. “In 2011 that price is likely to be almost $79,000,” says Fleet.

In some cases, there may be some federal income tax advantages for people who buy LTC coverage. “These policies are called tax-qualified long-term care insurance contracts or simply qualified contracts,” says Fleet. “There may be other tax advantages depending on the state in which you live,” he says.

Once you’ve decided to purchase LTC insurance, consider what you want your policy to cover as there are more coverage options today than in the past. Typically, a policy will cover a nursing home, assisted living, home and adult day care. Additionally, a policy should offer caregiver training, medical alert systems, home modifications and durable medical equipment. It may cover hospice care, too.

You also need to decide coverage level and for how many years. The average daily benefit should be a minimum of $300-a day or $9,000 a month for at least three years—preferably five.  Also be sure the policy has an inflation rider of at least 3 percent.

Schupack and his wife choose a flexible eight-year option—six years for him and two years for his wife—with a $400 daily benefit. He pays $2800 per year for the two of them.  Given that the average stay in a nursing home is just under three years, Schupack figures he has bought himself peace of mind.

Video: Getting the long-term care you need