Long-Term Care Insurance Demand Limited By Beliefs About Needs, Concerns About Insurers, And Care Available From Family

Abstract

In spite of the high costs and major financial risks involved in long-term care, the majority of older Americans do not own long-term care insurance. We conducted a survey designed to learn more about the role of the following four broad factors in affecting the demand for long-term care insurance: preferences and beliefs, such as notions about the likelihood that one will become disabled; substitutes for insurance, such as savings that could be spent on long-term care; substitutes for formal care, such as care provided by family members; and features of the private market, such as concerns about the high costs of coverage. We found evidence that each of these factors was important in explaining low demand for long-term care insurance. For example, people who believed they might need long-term care were more likely to purchase long-term care coverage. People who had alternative ways to pay for care, such as through savings, or those who could use unpaid care from family members, were less likely to purchase insurance. Features of the private market, such as people's lack of trust in insurers and the high cost of coverage, made people less likely to buy long-term care insurance. We conclude that policy interventions designed to address only one factor limiting the purchase of long-term care insurance are unlikely to dramatically increase demand for long-term care insurance.