One life event that you may have to consider is whether you will need the services of a nursing home, or of a nurse to visit your home. To protect your assets, you should consider purchasing long-term care insurance given that the average cost of a nursing home stay is $54,000 per year (MetLife survey; 2005).

Long-term care is the assistance given to an individual who is unable to care for himself or herself due to a prolonged illness or disability. The myriad of long-term care services can include therapeutic services to help an individual recover from an accident or illness, skilled nursing care in a nursing home, assistance with shopping, cooking, feeding, dressing, or bathing, and many other types of services that help meet the physical, medical, and social needs of the recipient.

Whether it is a temporary need or a permanent need, chances are pretty high that the longer a person lives, the more likely he or she will need some form of long-term care. Generally, if a person is unable to perform the basic activities of daily living (commonly known to in the long-term care insurance market as ADLs), then that person is considered a likely candidate for long-term care services. The six basic activities of daily living, as indicated by the National Association of Insurance Commissioners, are bathing, continence, dressing, eating, transferring and toileting. Another factor that may qualify an individual for long-term care is cognitive impairment. Cognitive impairment is a loss in intellectual capacity that results in the need for continual supervision.

Most long-term care insurance policies are marketed for nursing home care, assisted living, and home health care. Nursing home care pays for full-time medical assistance for those that cannot perform at least two of the activities of daily living. Assisted living facilities provide services on a part-time basis. Home health care services are also provided on a part-time basis by a visiting specialist inside one’s private home. Individuals can purchase long-term care insurance policies for a set period of time (number of years or lifetime) at a set daily (or monthly) amount.

The passage of the Health Insurance Portability and Accountability Act of 1996 has provided a greater means for individuals to obtain private long-term care insurance. Employers, groups, or individuals are able to deduct the premium payments and exclude benefit payments from their income tax returns. Both plans are tax qualified with benefits income tax-free. Some states offer limited tax credits for LTC insurance premiums.

While you may consider this protection to be old people's insurance, the coverage should be an important consideration in your portfolio. The younger you are when you buy it, the less expensive it will be over your lifetime. Also you may be interested in understanding the options your parents have.

Medicare will not cover long-term-care costs. The long-term-care insurance business is a growing industry. Americans are living longer, and the longer you live, the more likely you are to need long-term care. Between the ages of 65 and 80, there's a 1-in-4 chance that you will need long-term care; once you are over 80, the chances are 1 in 2.

Financial planners are recommending that people purchase long-term-care insurance between the ages of 55 and 70. The cost increases as the age of the purchaser increases.

There are many factors to consider when you look into long-term-care insurance.

• Is there coverage for both physical and cognitive disability?
• Is the policy tax-qualified or non-tax-qualified?
• What are the benefit triggers?
• What are the amounts allowed for daily nursing home costs or home-care coverage?
• What is the elimination period? This is the waiting period before benefits start.
• Is inflation protection built into the policy? You should always select a 5% compound inflation rider.
• How are pre-existing conditions handled?
• Is the policy renewable?

Shop wisely, compare the benefits and costs of policies from three companies, and check each company. A.M. Best Company (http://www.ambest.com) and Moody's Investor Services (http://www.moodys.com) are two rating services that you can use to check the financial stability of companies you are considering.