Dolan Smart Money Move: Don't despair! There are ways to lower the cost. Here's one of our best tips: Look for a policy with a limit on the number of years for which it would pay. This could be enough because statistics show that most people stay in nursing homes no longer than three years. They are either cured or – here's the bad news – they go out feet first. We recommend that you consider buying a long-term care insurance policy that gives you four years of benefits.

Question 3: When should I buy coverage?

There is no easy answer as to "when" you should purchase LTC insurance. Some professionals say "in your 50s," "wait until you're in your mid-60s," etc. About 40% of all persons admitted to nursing homes are under age 65. While the vast majority of those "younger" admissions will recover, their disability may prevent them from getting insurance later.

The average person who buys an LTC policy is 67 years old. We feel that owning it before that age is statistically not money well spent because you probably won't need it before then. When comparing policies and premiums at different ages, the main issue is whether over your lifetime you want to spend $40,000, $50,000, or $80,000 for the same coverage.

Question 4: How much LTC coverage do I need?

For most buyers, the policies should cover 80% to 100% of long-term care costs in their region. An important question to ask yourself when investigating the cost of a policy is to determine what percentage of the cost you may comfortably absorb. It should be somewhat less than what you currently spend on keeping yourself healthy, going on vacations, etc. The theory being that nursing home residents don't have to maintain a household.

Here's how to figure out how much you can "self insure:" Pick an amount, e.g., $200 a day, and ask yourself, "If my spouse had to write a check to a nursing home every month for $6,000 for my care (or more), would he or she be able to maintain the current standard of living?" If the answer is "yes" you've found a good amount of self-insurance vs. the daily benefit paid by insurance.

In addition, some states set minimum amounts of daily benefits that must be included in your policy, such as $50 or $100 a day. Minimum coverage should be $200 per day for nursing home and $75 for home care. Assisted living daily benefits should be somewhere between those two figures.

Dolan Smart Money Move: Ideally, you should purchase a policy with a daily benefit that can be applied freely among all types of care.

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