Will payouts keep pace with inflation?

Only if you pay for inflation protection. And you should. It is crucially important that if you purchase long-term care insurance, you make sure your policy includes an annual inflation adjustment rider.

It will do you little good to buy a policy today that has a $220 daily benefit if the cost of care rises to $400 a day or more in the future. The inflation rider will increase your daily benefit coverage by a set amount each year.

To protect yourself, buy a policy with a benefit that increases by 5% compounded a year. Important: Don't go for "simple" interest. Inflation grows at a compounded rate. In 20 years a $100 daily benefit would turn into $200 with 5% simple interest. Compounded, the benefit would be $265.