Life-insurance options broaden

People concerned more about the costs of at-home or nursing-home care are showing growing interest in insurance that pays for long-term care.

Experts credit an uptick in the number of these policies to the rising costs of care. Nursing-home care now costs an average of $55,000 a year.

Within the next 30 years, those expenses are expected to quadruple, reaching $68,000 a year for a home-healthcare aide and $241,000 for a year of nursing-home care, according to the American Council of Life Insurers (ACLI).

Even though most nursing-home stays are shorter than a year (one month of care costs about $4,400), the overwhelming cost of long-term care is drawing more attention to the value of additional insurance.

Institutions are responding to the increased need. More than one-third of large companies are offering long-term-care insurance as an employee benefit, according to ACLI, and 22 states are offering the insurance to their employees.

Long-term care was originally available only to Medicare recipients and those with acute physical problems. Now, people who have problems with daily activities, like bathing and eating, as well as those with cognitive and emotional problems can take advantage of long-term care benefits.

Most long-term care policies cover nursing-home and at-home care. For middle-class consumers who hope to maintain their standard of living while receiving long-term care, the insurance is essential to help afford a decent care facility, according to Chris Cooper, president of Elder Advocates Inc., a private geriatric-care management firm in Toledo, Ohio.

Most Americans are buying the insurance when they reach the age of 66. But that is too late for many consumers, says Mr. Cooper, because they may be turned down for even the most minor of medical issues.

"People should start talking about the insurance about five to 10 years before they actually retire," says Cooper.

More people are taking notice of the insurance after learning from an employer that Medicare will usually only pay for up to 20 days of a hospital stay, and will not cover at-home or nursing-home care.

Others are becoming more aware after caring for their own parents. "There are a lot of caregivers out there, and we're starting to see a lot of people take notice," says Lynn Boyd, senior director of ACLI.

Because of rising home and property values over the past decade, more consumers are also making use of life insurance that helps families pay their estate taxes.

Survivorship life insurance is essentially one policy written on two lives. Couples often buy them so that their children receive the benefit on their policy when their parents' estate tax comes due.

The rise in the number of Americans with estates worth about $1 million, at which point the tax now comes into play, has made the insurance far more useful. But because the tax threshold will move to $1.5 million next year, and to $3.5 million by 2009, others may choose to hold back.

Consumers will need to pay close attention, however, because the estate-tax threshold is scheduled fall back to $1 million by 2011.

"You need to follow the tax law to make sure this is a useful insurance," says Cooper.

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