An immediate long-term care plan is a type of annuity where you pay the insurer a lump sum to get a guaranteed income for life.  You buy this type of policy when you are about to start needing care, either at home or in a care home.  A medical assessment will be done to work out how much you will need to pay to get the income required to pay for your care.  The policy will pay out for as long as you need care, usually until you die.  As you have to have been assessed as needing care to qualify, you will almost certainly make a claim.

You cannot usually cancel this policy or get your lump sum payment back.  Your family will not get any of the money you pay in to the plan back if you die sooner than expected, although there is sometimes an option to protect the capital in case of early death.  If you live longer than is expected, the insurer simply carries on paying.  Some of the long-term care plans pay out on a level benefit basis, while others allow you to index link them.  Some insurance companies insist that the benefits are paid directly to the carer or care home, while others pay you directly.

Similarly, a deferred care plan is an annuity used to pay for long-term care except that the benefits are not paid out immediately, but instead, in a few months or years when you need it.