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.