To avoid becoming a financial burden to her children and grandchildren, Vera Smith bought long-term-care insurance. Like a growing number of Americans, the 87-year-old retiree saw it as a sensible way to cover care-giving costs not included in Medicare and conventional health insurance.

But nearly two years ago, Smith's insurer stopped paying benefits, contending that she violated the policy's terms by moving in with her daughter after she became too frail to take care of herself. That forced Veray Smith, the daughter, to quit her job and sell her mother's south Los Angeles house so she could afford to stay home with her.

"I'm the full-time caregiver now. It's hard," said Veray, who, along with her mother, has sued the insurer for bad faith. The insurer, Penn Treaty Network America Insurance Corp., declined comment.

Consumer advocates and insurance regulators say that lawsuits and complaints like the Smiths' are likely to mushroom in the coming years as more baby boomers and their ailing parents make claims on long-term-care insurance.

Sales of such policies grew by 65 percent between 2000 and 2004, but actual and projected payouts have already caused a shakeout that could leave some policyholders with huge medical bills worried that insurers can't or won't pay. Some insurers who underestimated their potential obligations have sharply hiked their premiums or abandoned the market altogether.

Insurers have denied long-term claims for a variety of reasons, lawyers say. They have, for example, rejected as inadequate documentation from elders too sick or distracted to be diligent record-keepers. Or they have rescinded policies, claiming the individual didn't fully disclose a pre-existing medical condition on their application.

In response to multiplying consumer complaints, some states are requiring more training for sales agents and limiting insurers' ability to raise premiums, along with other restrictions.

The growing popularity of long-term-care insurance "puts pressure on us as regulators to ensure that policies live up to their promise to pay," said Sandy Praeger, the insurance commissioner of Kansas and vice president of the National Association of Insurance Commissioners.

More than 6.1 million Americans were covered by long-term-care policies in 2004, up from 5 million in 2002 and 3.7 million in 2000, according to the National Association of Insurance Commissioners. Employers in particular have fueled the boom by offering group rates on care policies.

Policies typically cover care-giving, such as nursing home services, up to a fixed amount, such as $100 or $150 a day. But the policyholder must meet certain disability criteria, perhaps cognitive impairment or requiring help with dressing or bathing.

Premiums are based on an individual's medical history and the age at which he or she purchases the policy. For instance, a person in his or her late 40s who buys an employer-sponsored group policy can expect to pay premiums of $1,200 a year, Moore said. Annual premiums could rise to $2,000 for an individual policy and higher for an older person or someone with diabetes, cancer or another chronic disease.

But financial pressures have forced some companies out of the long-term market, including CNA Financial Corp., Transamerica Corp. and Fortis Insurance Co., although regulations require that the policies they sold must be honored. Complaints about long-term care policies rose to 2,472 nationally in 2005, up from 2,175 in 2004 and 1,755 in 2003, according to the national insurance commissioners group.

The Smiths' case, Praeger said, is a lesson to those considering a long-term-care policy. "You want to make sure it has the most flexibility possible and that help can be delivered in the most settings possible."

Vera Smith moved to Los Angeles from Tennessee in 1945 with $1 in her pocket, her daughter said, and eventually saved enough from jobs as a cleaning lady and a school cook to buy her house.

The policy Vera Smith bought in 1998 allowed her to stay in her own home even after she was diagnosed with Alzheimer's disease six years ago, paying up to $100 a day for caregivers. But after she was hospitalized with a severe urinary tract infection in January 2005, Smith grew so frail that her physician said she needed continuous care. The family decided she should move into her daughter's Phillips Ranch home where she had added a room to accommodate her mother, equipped with grab bars and a wheelchair ramp.

That's when insurer Penn Treaty stopped paying for caregivers, daughter Veray said, claiming that the residence did not qualify as a "home" under terms of her policy. Veray said her mother now has arthritis, diabetes and suffers from the after-effects of a stroke. In recent months, she also was diagnosed with bladder cancer.

The suit she and her mother filed in Pomona (Calif.) Superior Court last month accuses insurer Penn Treaty of breach of contract, bad faith and unfair dealing.

Smith, who holds power of attorney for her mother, said she notified Penn Treaty of her mother's change of address upon her discharge from the hospital and that her mother would be leasing the room for $100 a month.

A month later, Smith received a letter from the company denying her mother's claims for home helpers, explaining only that "your current residence does meet the policy definition of a home."

"I sent them a copy of the rent checks, pictures of my mother's room, the building permit from city, and daily care-giving notes," she said. "But they kept saying no."

Linda Carraghan, an attorney with Penn Treaty, declined to respond to the Smiths' charges, saying only that "company policy is not to comment on litigation.

The Smith's attorney, Frank Darras of Claremont, Calif., insists that Penn Treaty's definition of a "residence" in the policy should not disqualify the elder Smith. The policy, he said, defines "your personal residence" as "a private dwelling owned or leased by you, and includes a home for the retired or aged."