Betting the Ranch

• Share

(2 of 2)

The complexity in choosing a long-term-care policy (see box) falls somewhere between learning how to program your VCR and deciphering the tax code. Furthermore, it is extremely hard to predict future needs. Take the case of Sarah and Jesse Besso of Fort Lauderdale, Fla., who are in their 80s. They are glad they took out LTC insurance several years ago, before Jesse was stricken with a rare neurological disease. Their big regret: they chose a two-year policy that is scheduled to end this summer. "We'd be willing to pay to extend the policy if they'd give it to us," says Sarah. "Now we know, but it's too late."

When to buy is also tricky. "Don't buy too soon," warns Martin Weiss, chairman of Weiss Ratings, a Florida-based agency that evaluates insurance companies. If you buy a basic LTC policy (a $100 daily benefit, four years of coverage) when you're 40, it will cost only about $275 a year--but you could be paying that for 40 years. On the other hand, the same policy will cost about $1,000 a year at age 65 and $4,100 at 79. "The price curve really accelerates in the early 60s," notes Weiss. If you wait too long, the price may be prohibitive--and you may have a pre-existing condition that will preclude coverage. "The best age to buy is about 59," advises financial planner Suze Orman, author of You've Earned It, Don't Lose It.

Given all the frustration with managed-care plans, it is natural to wonder how well LTC will perform. "If it's not working for claimants, it doesn't have a chance," says Marc Cohen, Ph.D., vice president of LifePlans, a research company in Massachusetts that conducted a recent study on LTC claims, funded by the U.S. Department of Health and Human Services. Out of the 700 claimants interviewed, 86% were satisfied. "It's doing what it's supposed to," concludes Cohen. Those who were having trouble collecting tended to have older policies designed for a different health-care environment.

Until recently, more than 80% of LTC insurance was bought by individuals at an average age of 67. That will soon change. Some 2,000 employers--from American Airlines to SmithKline Beecham, as well as some state governments--are offering the insurance to employees, who buy, on average, at age 42. LTC insurance will get a huge boost next year when the Federal Government will offer policies to some 20 million eligible federal employees, retirees and their families.

Still, LTC insurance remains a hard sell. "It's a subject people don't want to talk about," says Susan Feld, an agent for LTC Insurance Services of Bellevue, Wash. "I will ask a man, 'Do you realize that the chances of your wife's needing long-term care are 1 in 2?'" Compare that with the odds of making a catastrophic insurance claim on a home (1 in 1,200) or auto (1 in 250). When deciding whether to buy long-term-care insurance, the question becomes very personal: Are you feeling lucky?