Long-term care insurance catches the attention of seniors, but the ideal time to buy it is actually when you are in your early 50s and healthy. At that point, insurance premium costs are lower, and you are less likely to have a pre-existing condition that disqualifies you or increase your cost. But a society that places such values on a youthful appearance seems unwilling to recognize these expensive facts of life.

The costs of long-term care are staggering today and should climb even higher in the coming years when baby boomers retire. Your children will either spend their inheritance on nursing home care, or they may find themselves taking care of you out of their own retirement funds.

The average annual cost of a private nursing home is now about $55,000, or $150 per day -- with many facilities in large cities costing more than $73,000 a year. Medicare does NOT cover the custodial level of care, and Medicare supplement policy only covers while Medicare is paying (a maximum of 100 days of rehabilitation). The Medicaid programs can cover custodial care in a nursing home but only if you qualify based on your income and assets.

Medicaid spend-down planning has received attention as a way to deal with nursing home care costs. This may be the only option available for many people confronted with paying for the high cost of quality nursing home care. The Medicaid rules are complex and are becoming even more restrictive, although there is significant help available for the spouse of a nursing home resident. If you are facing a nursing home crisis for yourself or a loved one and have Medicaid questions, you should get expert legal help. On the other hand, if you are in a position to plan ahead then you should consider purchasing long-term care insurance now rather than waiting to qualify for Medicaid later.

Long-term care insurance can provide long-term care options not available through Medicaid, depending upon the particular policy purchased. There are policies that pay for a custodial nursing facility, assisted living facility, senior daycare facility, home attendant care, as well as coverage for different combinations of care. Depending on your age and income, insurance premiums may be tax-deductible. The long-term care insurance industry is evolving so coverage and pricing need to be analyzed closely.

The base cost of a long-term care policy depends on three primary factors: your current age, your current state of health, and the location of your residence. The secondary factors are the amount and length of coverage, deductible period before the policy becomes active, and inflation rider.

If you purchase your long term care policy early, the cost will be lower. A healthy 50-year-old could purchase more than adequate coverage for $1,500 a year. For a 70-year-old, the same policy might cost $6,500 a year. You will have to decide or work out the numbers with your financial advisor/estate planner as to what would be the return on your investment.

The policy premium can be raised if your health status deteriorates. Therefore staying active and healthy do have financial benefits. However, the insurance companies can ask state regulators to raise premiums for an entire age group, once they realize they have under-priced their policies based on their claims experience.

Your location is also important. Nursing costs typically are higher in major metropolitan areas than in smaller communities. For the same level of nursing care, in California it may cost $225 a day but only $150 a day in North Carolina. $75 x 30day = a $2,250 per month and $27,000 per year difference.

You will also need to consider sufficient coverage and length of coverage for what you want to be covered. Do you want to stay at home with caregivers coming in, live in an assisted living facility to avoid a nursing home, or a will nursing home be just fine? Purchase the policy that will cover what you want for the amount of time you think you may need. The typical life expectancy in a nursing facility is 2.5 to 3 years. Some may consider limited coverage to reduce cost. Lifetime coverage may not cost much more than limited coverage if you purchase your policy in your mid-50s.  Do the comparison before committing to a policy.

Another question is when and how to activate your long term care policy? The typical elimination period (before a policy becomes active after you file the claim and meet the requirements) is 60 days or 90 days before your policy becomes active. The premium between the 60 days and 90 days may be significant over a period of time. The trigger to filing for a claim usually requires a physician to certify to the insurance company that you need the benefits -- and those benefits will be paid only to qualified providers. A non-ambulatory certified board and care facility may not be a qualified provider and whereas a certified skilled nursing facility is. It really depended on the stipulations of your policy.

Further more, most policies require an inability to perform at least two activities of daily living to initiate the benefits. The six activities of daily living are eating, dressing, bathing, toileting, continence and transferring. If your mental or cognitive impairments meet the requirements, policies may also become active. Most policies no longer require a hospitalization before benefits start, but be sure to double check your policy.

Inflation can diminish your coverage amount over time. A 3% inflation rate can reduce your purchase dollar by half in 25 years. Further, it is expected that health care costs will rise more than the general inflation rate. Consider inflation rider coverage as an option.

Your long term care insurance premiums may be tax deductible. The “qualified” long term care insurance policies received special tax treatment under the Health Insurance Portability and Accountability Act passed in 1996. The qualified policies must adhere to the National Association of Insurance Commissioners regulations and the policy must offer the consumer the options of “inflation” and “non-forfeiture” protection. The policies must also contain other activities of daily living and cognitive impairment triggers, but may not offer medical necessity triggers. In addition, a certification from a licensed health care practitioner is necessary to demonstrate the need for assistance with the activities of daily livings and is reasonably expected to continue for the duration of at least 90 days. Under a cognitive impairment trigger, coverage begins when the individual has been certified to require substantial supervision to protect him or herself from threats to health and safety due to cognitive impairment. Policies purchased before 1/1/1997, may be grandfathered in and you should check with your insurance broker or with the state’s insurance commission for this possibility.