Traditional long-term-care insurance generally reimburses certain expenses or pays a daily cash benefit for those who require assistance with day-to-day tasks such as dressing and bathing.

About 69 percent of Americans turning 65 today will need long-term care at some point in their lives, according to LeadingAge, a Washington-based lobbying group that represents nursing and retirement homes. The number of Americans aged 65 or older may more than double by 2040 to about 81 million, from an estimated 40 million in 2010, according to the U.S. Census Bureau.

Cost Of Care

The median cost of a private room in a nursing home is $213 a day or about $6,500 a month, according to a May survey by Richmond, Virginia-based Genworth. Assisted-living facilities, which unlike nursing homes generally don't have round-the-clock skilled nursing staff, charged an average of more than $3,000 a month, according to Genworth.

"A lot of people become convinced, through scare tactics or statistics or whatever the case may be, that they need long-term-care insurance. Then they start looking at policies, which may be prohibitively expensive," said Scott Witt, founder of New Berlin, Wisconsin-based Witt Actuarial Services, a fee-only insurance advisor.

A traditional long-term-care policy from Springfield, Massachusetts-based Massachusetts Mutual Life Insurance Co. that pays a maximum of $200 a day in benefits over 10 years, with an automatic 5 percent annual inflation adjustment, would cost a 55-year-old couple about $6,700 annually or about $590 per month, according to a quote obtained in April by Katt and confirmed with the company.

Raising Premiums

Neier, the retirement home resident, said she hadn't thought about the prospect of paying for long-term care until her 70s, when she looked into the policies. She had been paying for her stay at VillageCare, where apartments start at $3,600 a month including some meals, with the proceeds from the sale of her home in Queens, New York, until this year when she qualified for Medicaid, she said.

Companies that underwrite long-term-care policies have had to raise premiums or stop selling the insurance altogether in recent years. That's because they overestimated lapse rates, or the number of people who allow their policies to lapse, meaning the companies have had to pay out more in benefits than they anticipated, said Carl Friedrich, a principal and consulting actuary for Seattle-based Milliman Inc., a benefits consultant.

New York-based MetLife Inc., the largest U.S. life insurer, stopped accepting applications for new long-term-care policies at the end of 2010. In February New York-based Guardian Life Insurance Co. of America said it would stop writing new long-term-care insurance policies by the end of the year. Munich-based Allianz SE has sold no new long-term-care insurance since 2009.

Sales Are Up