Most older Americans have no insurance to cover the incredibly expensive long-term care often necessary when chronic illness or disability strikes late in life. Nursing-home costs alone can run $70,000 to $100,000 a year. At the most expensive centers the bill can approach twice that much.

Long-term care usually involves nonmedical help with such daily tasks as bathing and dressing. Health, life and disability insurance won't pay for that. Medicare will cover very little. But long-term-care insurance will.

People who don't have coverage have to pay out-of-pocket until they run out of money and become eligible for Medicaid. At that point, you're basically letting the government pick a nursing home for you.

Annual premiums can range from $1,000 to $6,000, depending on the level of care you insure and your age when you buy the policy. Premiums start out at relatively modest levels for those in their 50s and then rise steeply, making the insurance costly or even prohibitive. Buying at a younger age locks in the lower rate.

Generally, benefits become available once you meet three of the following conditions:

• You are unable to perform two of six basic activities of daily living (such as bathing or dressing) or you show signs of severe cognitive impairment, such as those associated with dementia.

• Your doctor or other health professional certifies that your condition is expected to last at least 90 days.

• You pay for long-term-care services for the number of days in your waiting period.

Then, depending on the beneficiary's condition and terms of the policy, care proceeds through several stages.

Skilled care. This is medically necessary care provided by licensed professionals, such as nurses and therapists, working under the supervision of a doctor.

Intermediate care. This also requires supervision by a physician and skilled nursing care, but it is needed only intermittently.

Custodial care. This covers nursing home services. Benefits cover mainly room and board plus payments for assistance with the activities of daily living.

Home health care. Depending on the policy, benefits for home health care may range from homemaking and chore services to occupational therapy and laboratory services.

Most people who have long-term-care coverage wish they had bought more, according to a study by LifePlans. Consider at least a three-year benefit period, which would cover the average nursing home stay. Also, a short "elimination period" (basically a deductible -- see below), even though it will increase premiums, could save you out-of-pocket costs in the long run. And look for a policy that covers care in as many situations as possible: at home, in an assisted living facility, in a nursing home.

Pick the right daily benefit amount. The first decision you need to make when buying long-term-care insurance is how big a daily benefit you need. But if you rely solely on the national average, you could fall short of the cost of care in your city -- or you could end up buying too large a benefit and skimping on other parts of your coverage. To figure out how much coverage you need, check out prices for facilities in your area you wouldn't mind using. Then figure out how much of the bill you could shoulder yourself.

Find out how the policy elimination period (deductible) is satisfied. A policy with 90-day elimination period, for example, means you're willing to pay out-of-pocket for the first 90 days of care. You can save money by finding a policy that will credit you for an entire week if you pay for care at least one day a week. Most people should consider a 60-day or 90-day waiting period, which keeps premiums manageable but limits out-of-pocket costs.

Compare how inflation protection works. Most policies offer inflation protection, so your daily maximum benefit grows but your premium doesn't. But there are many ways inflation protection can differ. The best inflation-protection coverage automatically increases your benefit amount by 5% compounded annually, keeping pace with the rising cost of care. Such policies are pricey, often doubling the cost of coverage, but your premiums will remain the same even as the benefit amount increases.

Policies with future-purchase options, which allow you to buy additional coverage over time without medical screening, can start out costing half as much as policies that automatically increase your benefit amount. But such policies soon wind up being much more expensive. That's because the increased benefits are generally priced at your age when you buy the extra coverage -- and not how old you were when you first bought the policy.

Does the policy exclude any medical problems? Long-term-care policies carry exclusions for preexisting conditions, which usually won't be covered for six months or a year after a policy is in force. Pass up any policy that excludes "mental disorders" unless the seller satisfies you that organically based mental disease is covered.

Stick with major insurance companies. Many big companies have never increased premiums for current policyholders. It's a good idea to stick with such companies, which know the business and have been stable in the past-especially because it may be decades before you need the policy and it's tough to switch companies when you're older and have developed medical problems.

Adapted from Kiplinger's Practical Guide to Your Money, by the editors of Kiplinger's Personal Finance magazine (Kaplan Publishing. Copyright 2005 The Kiplinger Washington Editors, Inc.) Available wherever books are sold or direct at kiplinger.com/store/books.