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How much will payouts be?

As with all insurance, the payouts you receive are a reflection of the coverage you choose. Bear with us here; it's a bit complicated.

When shopping for insurance, you - along with your LTC insurance agent - typically start by figuring out the daily cost of nursing-home care today. Next, you need to decide how many years of that coverage you would like. The bigger the number, the more expensive your policy. As a rule of thumb, the average amount of time spent in a nursing home (among folks who need that type of care) is about three years.

Let's say you want to plan for care at $180 a day - the current national average - and you want the coverage to last for four years. That's $180 multiplied by 1,440 days, which equals $259,200. So, in the jargon of LTC, you would choose a policy with a lifetime benefit of $259,200.

That doesn't mean you will be limited to drawing $180 a day for four years. Most plans just let you draw on the lifetime benefit: You can draw it down over 10 years or 10 months. That's your decision. All the company cares about is that your total lifetime benefit will not exceed that $259,200.