Does home equity affect decisions on long-term care insurance purchases? Evidence from the United States.

TitleDoes home equity affect decisions on long-term care insurance purchases? Evidence from the United States.
Publication TypeJournal Article
Year of Publication2019
AuthorsHirth, RA, Acharya, Y, Levy, HG, Langa, KM
JournalResearch on Aging
Volume41
Issue6
Date Published07/2019
ISSN Number1552-7573
KeywordsDecision making, Homeownership, Long-term care insurance
Abstract

The low uptake of private long-term care insurance (LTCI) by the elderly in the United States, despite visible risks, has left economists puzzled. Prior studies have hypothesized that home equity can be a substitute for LTCI and hence may partly explain the low uptake. We test this hypothesis empirically. We utilize exogenous variation in house prices at the level of the metropolitan statistical area (MSA) as an instrument for home equity for individuals residing in that MSA and data from the Health and Retirement Study. In the most robust specifications, we find no evidence that the elderly change their decision on LTCI based on variation in their home equity, and even specifications requiring stronger identification assumptions imply only small effect magnitudes. Home equity as a substitute for LTCI does not appear to be a major contributing factor to low LTCI take up.

DOI10.1177/0164027519830078
User Guide Notes

http://www.ncbi.nlm.nih.gov/pubmed/30803354?dopt=Abstract

Alternate JournalRes Aging
Citation Key10030
PubMed ID30803354