?Long-term care insurance: Does experience matter
Abstract
We examine whether long-term care (LTC) experience helps explain the low demand for long-term care insurance (LTCI).
We test if expectations about future informal care receipt, expectations about inheritance receipt, and LTCI purchase decisions vary between individuals whose parents or in-laws have used LTC versus those who have not.
We find parental use of a nursing home decreases expectations that one's children will provide informal care, consistent with the demonstration effect.
Nursing home use by in-laws does not have the same impact, suggesting that individuals are responding to information gained about their own aging trajectory. Nursing home use by either a parent or in-law increases LTCI purchase probability by 0.8 percentage points, with no significant difference in response between parents’ and in-laws’ use.
The estimated increase in purchase probability from experience with LTC is about half the previously estimated increase from tax policy-induced price decreases.
JEL classification
- G22;
- D81;
- J14
Volume 40, March 2015, Pages 122–131
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