(MONEY Magazine) – Most people's foremost fear in planning their retirement is simply outliving their money. Yet that terror can be tamed by Social Security, a pension and a well-planned program of personal savings and investments. What should rank as the No. 1 financial fear of growing old is the cost of long-term care for people too feeble or crippled by illness to look after themselves -- a nonstop expense that can quickly deplete resources built up over a lifetime. Now this problem too can be alleviated. Growing numbers of insurance companies are offering long-term-care policies that are more comprehensive and affordable than earlier versions. The longer we live, the more likely it is that we will have to pay others to dress and groom us, feed us and move us around. Americans' life expectancy at age 65 is increasing dramatically. Since 1940, the chances of living another 20 years have doubled, from one in five to two in five, and they are expected to rise to three in five by the year 2030. With longevity comes a new set of medical problems. Where once debility came largely from strokes, cancer or other acute diseases, for the over-85 generation it is more likely to come as a gradual loss of the ability to take care of oneself. People live for years with chronic ailments such as Alzheimer's disease and osteoporosis, which seldom require long hospital stays but render the victims more and more helpless. In the past, the duty of caring for them fell to their children or other family members. Now, with the generations dispersed geographically, the givers of care tend to be paid strangers. While only 8% of 65- to 84-year-olds are in nursing homes, 32% of the 85-plus group are institutionalized. Of the rest, an estimated 23% stay at home with regular assistance from nurses, housekeepers or meal-delivery services. The cost can be crushing. At average rates, nursing homes charge $24,000 a year, and the fees are escalating in step with inflation. Home-care services, which include physical therapy, administration of drugs and food preparation, are $30 to $50 a day. Few people are up to the costs. Last summer a congressional subcommittee on aging found that 70% to 80% of nursing-home residents used up all of their capital in a year or so and were forced onto welfare. Once impoverished, nursing-home patients usually have to move to less desirable accommodations in the same facility or to a less costly institution. Most Americans have done little or nothing to prepare for the high risk of needing long-term care -- or its catastrophic cost. One reason is that they assume Medicare will pick up their nursing-home bills. But it's not true. Medicare pays only for stays in skilled nursing homes -- ones staffed with doctors and nurses -- and then only if admission follows a hospital stay. Further, this coverage is limited to 100 days per admission. Supplemental Medigap plans, which you can buy from private insurers, pick up part of the medical expenses that Medicare doesn't pay. But Medigap too excludes long-term care. So does the catastrophic coverage that Congress is likely to add to Medicare this year. The new plan is aimed at expenses resulting from acute illnesses such as heart attacks and injuries such as bone fractures. Long-term care necessitated by the gradual enfeeblement of aging rather than acute illness is uncovered except by Medicaid, the medical welfare program for & the indigent. Worse yet, many of the most desirable nursing homes discourage -- or refuse outright -- applicants who are on Medicaid. The best protection against long-term care's financial wipeout is a comprehensive, solidly funded life-care community, a retirement residence that provides medical and personal care to the elderly in or out of a nursing home. But you have to plunk down an entrance fee of at least $20,000 -- and usually much more. Another alternative, so far open to only a few, is a specialized health maintenance organization that includes long-term care among its prepaid services. The third choice and the only one for most people is to buy their own long-term-care insurance policy. The premium is likely to be more than $1,000 a year if you put off the purchase until you are past 70. Fortunately, though, the coverage is becoming more comprehensive and some insurers are abandoning escape clauses that marred earlier policies. Whether you should sign up for long-term-care insurance depends largely on your age. Generally, people under 50 are best advised to do nothing because broader and better solutions, public or private, probably lie ahead. Those past 50, however, or the children who might someday have to support them, can't afford to wait. Since purchase of long-term-care policies is limited to those in good health and few companies sell insurance to anyone over 80, it is prudent to insure yourself by age 60 or so. About 70 commercial insurers and seven Blue Cross plans now offer coverage for long-term care -- generally meaning up to six years -- in either a nursing home or the patient's own dwelling. Because the coverage is fairly new, insurers are wary of assuming too much risk. Even the few plans offering reasonable and affordable protection are not available in every state. (For the names of companies selling long-term-care insurance in your state, write to the Health Insurance Association, 1001 Pennsylvania Ave. N.W., Washington, D.C. 20004.) Check the table below for the names and features of some of the best and most widely available policies. And take a close look at the following characteristics of any policy you might consider buying: Costs and benefits. Annual premiums for long-term-care insurance range from $100 or so for those in their thirties to more than $3,000 for the broadest coverage on people nearing 80. Almost all policies have one major drawback: they indemnify you for a fixed dollar amount per day, no matter how much you are paying for services or how much their cost may rise over the years. An antidote provided optionally in a few policies is an inflation provision at extra charge, typically 1% more a year for each 1% of additional benefits. In contrast, hospital and major-medical insurance pays all or a high percentage of each bill. (One Blue Cross group policy in Rochester, N.Y. available to the public is an exception: it pays 75% of prevailing rates for long-term care.) On average, U.S. nursing homes charge $65 a day, and top rates are more than twice that. The daily amount reimbursed by most nursing-home policies is up to you. The higher the premium you pay, the higher the benefit, with twice the coverage generally doubling your cost. For instance, American Republic Insurance in Des Moines would charge a 70-year-old $800 annually for a $50 daily benefit lasting 1,500 days and $1,600 for $100 a day. Once you become insured, however, your premium should remain constant unless it includes inflation protection. Deductibles and duration of benefits. How many days of care come out of your pocket before your benefits begin and how long they continue will greatly influence the premium you pay. Most insurers offer at least two choices of waiting periods, typically 20 or 100 days. Selecting a 100-day waiting period can reduce your premium by as much as 30%. So choose as long a waiting period as you can afford.

At the other end, though, more is worth paying for. Since the majority of policy-holders will need care for less than a year, benefits that quit after 12 months or so may cost only half as much as those continuing for the six- year maximum many policies currently offer. The extra coverage, however, can mean the difference between solvency and bankruptcy for the minority whose confinement continues for years. Benefit prerequisites. Many policies require hospitalization for three days or so before benefits begin. Yet the need for paid care is often the result of a deteriorating condition such as arthritis, which may not put you in the hospital at all. The most worthwhile policies require only that a doctor certify the need for care. Types of services covered. Some people require medical services; others just need personal care. Some people can get along in their own home; others have to be in a nursing home. Ideally, a long-term-care policy should offer the widest possible options, including nursing homes in three categories of medical care: skilled homes; intermediate homes, which provide rehabilitative therapy; and custodial homes, which offer little more than practical nursing. The best policies also pay for care at home, adult day-care centers and brief intermittent care at a nursing home, also known as respite care. The policy should offer those benefits in nearly equal amounts so as not to bias your choice. A policy that covers nursing-home care for years but home care for only a month or so forces you to opt for institutionalization or to skip benefits. The fewer the types of care covered and the more heavily the choice is skewed toward one type of care, the less useful the policy is. Most companies now cover home care, but some, such as CNA of Chicago, charge extra for it or, like Amex Life of San Rafael, Calif., reduce the payments over time. Amex's plan pays for home care only after you have been in a nursing home and only for as many days as you were there. Furthermore, Amex cuts the daily benefit after 30 days. While companies insist that this practice keeps premiums down, you should carefully compare premiums and policies to make sure that less coverage actually costs less. For help you can write for a free brochure and shoppers' worksheet, called Choice Time (Aetna, Box 104, Hartford, Conn. 06156). It was prepared by Esther Peterson, the dean of consumer advocates and the nation's first special assistant to the President for consumer affairs. Exclusions. Alzheimer's disease can leave victims helpless for 15 years or longer. That's why some insurers exclude ''organic brain disease'' from the conditions their policies cover and why you shouldn't buy any such policy. (All of the policies in our table cover organic brain disease.) Most policies have a six-month or so waiting period before they start paying benefits for diseases you had before paying the insurance. This pre-existing illness clause is standard, and you can't avoid it. Renewability. Be sure your coverage will continue for as long as you want it to and that your premiums can't be hiked unless everybody's are in your area. In the language of insurance, such a policy is guaranteed renewable. An examination of premiums indicates that you pay little or no more for this highly desirable feature. If you live in Arizona, Hawaii, Indiana, Iowa, Kansas, Nebraska, North Carolina, North Dakota, Oklahoma or Virginia, you are protected by law against cancellation of a long-term-care policy because of age or deteriorating health. Any policy that can cut you off just as liability begins to increase is a rotten deal.

BOX: AN ANATOMY LESSON ON SIX POLICIES-- Because long-term-care insurance is expensive, you should be able to customize your coverage. Ideally, you want to pay for only the types of care you think you will require and to keep benefits flowing for as long as you are likely to need them. The policies dissected here pay benefits, after a 90-day wait, primarily for nursing-home care. They share these points:

-- All are guaranteed renewable; your coverage cannot be canceled if you pay on time. -- All will cover you for Alzheimer's disease. -- All can be written to pay benefits for at least four years. -- All are available in most states.

The rates shown here apply if you are in good health; certain ailments may be insurable at a higher rate. Where inflation protection is optional, we include the cost of one year's increased coverage. After that, the premium rises when the benefit is hiked. Desirable features are marked with a tablet like the one at left.

CHART: TEXT NOT AVAILABLE CREDIT: PHOTOGRAPH BY DAN WAGNER CAPTION: NO CAPTION DESCRIPTION: Costs, benefits, and services provided by 10 long term health insurance policies