Flexible Insurance for Informal Long-Term Care: A Study of Stated Preferences

70 Pages Posted: 8 Jul 2021

See all articles by Hazel Bateman

Hazel Bateman

UNSW Sydney, CEPAR

Shang Wu

Aware Super

Susan Thorp

The University of Sydney Business School

Ralph Stevens

CPB Netherlands Bureau of Economic Policy Analysis; CEPAR

Date Written: March 23, 2021

Abstract

We collect and analyze stated preferences for long-term care insurance that pays income in poor health states instead of reimbursing formal care costs. Around 75% of the sample of 1008 pre-retirees chose to purchase at least some long-term care income insurance from a menu that also included liquid wealth and a life annuity. Our results show that long term care income insurance is complementary to informal care and is attractive to seniors who plan to rely on family members for extensive care. Those who have access to extensive informal care demand 25-37% more health- contingent income per year than those who do not. Females who expect to rely exclusively on extensive care from family members are willing to buy more cover than males. We also find that if long-term care income insurance were available, many healthier seniors would release funds set aside to self-insure long-term care risk and purchase additional longevity insurance.

Keywords: Long-term care insurance, longevity insurance, aged-care, informal care

JEL Classification: G52, I13, J32

Suggested Citation

Bateman, Hazel and Wu, Shang and Thorp, Susan and Stevens, Ralph, Flexible Insurance for Informal Long-Term Care: A Study of Stated Preferences (March 23, 2021). UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3873660 or http://dx.doi.org/10.2139/ssrn.3873660

Hazel Bateman (Contact Author)

UNSW Sydney, CEPAR ( email )

High Street
Sydney, NSW 2052
Australia

Shang Wu

Aware Super ( email )

388 George St
Sydney, NSW 2000
Australia

Susan Thorp

The University of Sydney Business School ( email )

Abercrombie Building
H70
The University Of Sydney, NSW 2006
Australia
0290366354 (Phone)

Ralph Stevens

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

HOME PAGE: http://https://www.cpb.nl/medewerkers/ralph-stevens

CEPAR ( email )

Sydney, NSW 2052
Australia
+61 2 9385 1883 (Fax)

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