With a Traditional long-term care policy, you basically prepay caregiving expenses and receive reimbursements for future charges. Some premiums are tax deductible after age 40 and rise with age. Policies require good health to qualify. You get reimbursed for care expenses up to set daily and time limits. To claim benefits, you must meet an ADL requirement for a set number of days. There are no refunds If you die or stop paying premiums.

The original products encountered significant problems and since then, have raised premiums and cut benefits. Currently, about 10 companies sell directly to individuals and 5 others work only with employers.

Linked Benefits policies link care payments to a life policy or an annuity contract. These newer products are still evolving and adding features.

a) Life insurance policies linked to an accelerated death benefit that are triggered by specific health conditions or ADLs. While the premium isn’t deductible, claims are tax-free. Underwriting may be less stringent than for traditional LTCI. The care benefit is usually limited to 50% of the face amount.

b) Annuities contracts - Deferred long-term care annuities are a variation combining elements of immediate and deferred annuities. The “care part” can release immediate payments upon meeting health criteria, operate like traditional LTCI for tax purposes, and if unused go to heirs. The “income part” defers payments to a future date, and generates income on a tax-deferred basis. However, annuities may complicate taxes and Medicaid qualification.

Cash indemnity policies, such as critical illness policies, pay a lump sum cash benefit for you to use as you choose, when you are diagnosed with a named medical condition (e.g. cancer diagnosis).