Adam W. Shao, Michael Sherris and Joelle H. Fong
This paper presents a comprehensive assessment of premiums, reserves and solvency capital requirements for long-term care (LTC) insurance policies using Activities of Daily Living (ADLs) and U.S. data. We compare stand-alone policies, rider benefit policies (LTC insurance combined with whole life insurance), life care annuities (LTC insurance combined with annuities), and shared LTC insurance in terms of premium cost and solvency capital requirements.
Premiums and best-estimate reserves for generic LTC insurance policies are determined using Thiele's differential equation. Product features such as the elimination period and the maximum benefit period are compared using a simulation-based model.
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