Abstract
This paper explains why those individuals who purchase long-term care insurance usually postpone their decision until they reach the age of retirement. This behavior is shown to be rational if there are fixed costs of loading or if there is uncertainty about the costs of disability. Individuals with a low risk of becoming disabled before retirement may prefer to buy insurance late in order to avoid losses in expected income. However, if the probability of becoming disabled after retirement is uncertain, it is generally preferable to buy long-term care insurance early.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Alecxih, Lisa Maria B. et al. (1995). “Can Regulation Improve Long-Term Care Insurance? Lessons from the Medigap Experience,” Journal of Aging & Social Policy 7(2), 19–40.
Breyer, Friedrich. (1997). “ ¨ Okonomische Grundlagen der sozialen Pflegeversicherung.” In Bertram Schulin (ed.), Handbuch des Sozialversicherungsrechts, Band 4: Pflegeversicherungsrecht. Munich: Beck, 59–91.
Cohen, Marc A., and A. K. Nanda Kumar. (1997). “The Changing Face of Long-Term Care Insurance in 1994: Profiles and Innovations in a Dynamic Market,” Inquiry 34, 50–61.
Cohen, Marc A., A. K. Nanda Kumar, and Stanley S. Wallack. (1994). “Long-Term Care Insurance and Medicaid,” Health Affairs 13(4), 127–140.
Department of the Treasury (ed.). (1990). Financing Health and Long-Term Care: Report to the President and to the Congress. Washington: U.S. Government Printing Office.
Meier, Volker. (1994). “On the Demand for Long-Term Care Insurance,” Working Paper, University of Halle.
Meier, Volker. (1996). “Long-Term Care Insurance and Savings,” Finanzarchiv 53, 561–581.
Pauly, Mark V. (1974). “Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection,” Quarterly Journal of Economics 88, 44–62.
Pauly, Mark V. (1990). “The Rational Nonpurchase of Long-Term-Care Insurance,” Journal of Political Economy 98, 153–168.
Richter, Wolfram F., and Klaus Ritzberger. (1995). “Optimal Provision Against the Risks of Old Age,” Finanzarchiv 52, 339–356.
Scanlon, William J. (1992). “Possible Reforms for Financing Long-Term Care,” Journal of Economic Perspectives 6(3), 43–58.
Shavell, Steven. (1979). “On Moral Hazard and Insurance,” Quarterly Journal of Economics 93, 541–562.
Sloan, Frank A., and Edward C. Norton. (1997). “Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-term Care Insurance Market,” Journal of Risk and Uncertainty 15, 201–219.
Zweifel, Peter, and Wolfram Str¨uwe. (1996). “Long-Term Care Insurance and Bequests as Instruments for Shaping Intergenerational Relationships,” Journal of Risk and Uncertainty 12, 65–76.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Meier, V. Why the Young Do Not Buy Long-Term Care Insurance. Journal of Risk and Uncertainty 18, 83–98 (1999). https://doi.org/10.1023/A:1007716528284
Issue Date:
DOI: https://doi.org/10.1023/A:1007716528284