At a party over the holidays, a woman I've known forever asked me about long-term care insurance. She and her husband were starting to think about retirement and its more unpleasant partner: old age. Specifically, she wanted to know if LTC insurance was a good idea. My answer, as is so often the case with personal financial issues, was "it depends."

As I'll explain, chances are you're going to need some form of custodial care during your lifetime. For many people, LTC insurance can be a good way to mitigate the high costs that go along with it. What factors should you consider?

WHAT IS LONG-TERM CARE?

Long-term care refers to help with what insurers call the "activities of daily living" - bathing, dressing, eating, and moving - associated with injuries, strokes and mental deterioration like Alzheimer's disease. Actually, the phrase "long-term care" may be a bit of a misnomer. Someone with a broken hip, for example, may need this type of assistance for just a few months. Obviously, for short and simple problems, a family member can often provide the required care (though that often results in an onerous burden). More serious and lengthy issues require someone to come in every day, or care in a nursing home or an assisted-living facility.

WILL YOU NEED LONG-TERM CARE?

Statistically, the answer is yes. You will probably need this type of assistance. Despite the many health problems in America, collectively, we're living longer, and that clearly increases the probability. In fact, according to the U.S. Department of Health and Human Services, at least 60 percent of people over age 65 will require some long-term care services at some point in their lives.

However, the statistical probability that you'll need this type of care doesn't mean you need LTC insurance. If you're quite wealthy, you can effectively self-insure. Others may have children who can help either physically or financially. And finally, if you're needy, you may qualify for Medicaid assistance.

The nightmare scenario occurs when one spouse's medical needs wipe out the family's financial assets, reducing the healthy spouse to poverty and, potentially, the arduous task of being the caregiver. Note that women tend to be healthier than their husbands, which means two things. First, they often become the caregiver; second, if long-term care seriously depletes the family's financial resources, they're the ones in jeopardy.

WHAT DOES LTC COST?

Long-term care, particularly if required for a truly long time, from many months to years, can be expensive. Home care services range from $10,000 to $50,000 per year today. Nursing home care is, as you would expect, even more expensive: the average annual cost is more than $75,000. All those figures, of course, will rise in the years ahead.

If you're extremely wealthy, those figures won't bother you. And if you're extremely needy, your LTC bills will probably be covered by your state's version of Medicaid. But for the vast number of people in between, the cost of long-term care can quickly eat through assets and put their financial security at risk. These are the folks who should consider LTC insurance; most health insurance policies and Medicare do not cover this type of care. It's not cheap, but it may be worth it, especially if you purchase it when you're relatively young. Continued...