Official websites use .gov
Secure .gov websites use HTTPS
Why do people lapse their long-term care insurance?
Why do people lapse their long-term care insurance?
- Collection:
- Health Policy and Services Research
- Series Title(s):
- Issue in brief (Center for Retirement Research)
- Author(s):
- Hou, Wenliang, author
Sun, Wei, author
Webb, Anthony, author - Contributor(s):
- Boston College. Center for Retirement Research, issuing body.
- Publication:
- Chestnut Hill, MA : Center for Retirement Research at Boston College, May 2016
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Insurance Coverage -- statistics & numerical data
Insurance, Long-Term Care -- statistics & numerical data
United States - Genre(s):
- Technical Report
- Abstract:
- Long-term care, including both nursing home and home health care, is a substantial financial risk for most retired households. Yet few buy long-term care insurance, and many who do let the policies lapse even after holding them for years. This brief summarizes a forthcoming study that shows more than one quarter of individuals who buy long-term care insurance at age 65 will lapse their policies before death, forfeiting all benefits. Economic theory predicts that individuals at high risk of needing care should retain coverage while those at low risk should lapse, but the data show the opposite pattern: people who subsequently use care are more likely to lapse, even though many have a good understanding of their relative risk of going into care. This brief seeks to explain why individuals lapse--specifically whether the decision reflects the financial burden of insurance premiums, a strategic calculation, or a deterioration in cognitive ability. The brief proceeds as follows. The first section presents data on lapse rates. The second section lays out alternative explanations for lapse rates. The third section tests these explanations by examining who lapses and then assesses the consequences of lapsing by exploring who uses long-term care. The final section concludes that two types of individuals are more likely to lapse: (1) those with low cognitive ability, who may lose the capacity to manage their finances; and (2) those with lower incomes and less wealth, who may find that their policy has become unaffordable.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
- Extent:
- 1 online resource (1 PDF file (9 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101710040 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101710040