A number of insurers have left the long term care (LTC) insurance marketplace. That likely was the result of economic losses. The LTC market has escalating costs associated with providing long term care. With low interest rates, it is hard for insurers to match.
Accordingly, those insurers who are left in the LTC marketplace will be very focused on carefully managing their loss ratios.
Let’s take the case of Betsy. She has $1,000,000 of LTC insurance. She has a mild stroke.
The insurers have an ADL test. ADL stands for activities of daily living.
If Betsy does not meet the ADL test, because her stroke has not left her disabled enough, then she does not get the money to pay for care.
So, it does not matter how much LTC insurance that the person has, if the person does not meet the ADL test, they get nothing.
In discussions at a recent financial services meeting, I had a discussion with an accountant who remarked that in light of the ADL test, it is likely better for persons to “self insure” for long term care.