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Why Do People Let Their Long‐term Care Insurance Lapse? Evidence from the Health and Retirement Study
Author(s) -
Li Yong,
Jensen Gail A.
Publication year - 2012
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1093/aepp/pps017
Subject(s) - long term care insurance , business , term (time) , actuarial science , long term care , health care , economics , economic growth , medicine , nursing , physics , quantum mechanics
Abstract This paper empirically analyzes how often and why individuals drop their long‐term care insurance (LTCI) coverage, using data from the 2002‐2008 Health and Retirement Study. It finds that over a two‐year period 13% of LTCI policies lapse. It also finds that the probability of an LTCI lapse increases with a lack of consumer knowledge about their policy's benefit provisions, with prior encounters with the long‐term care system, with less expensive policies, and with less generous policies. These findings raise the possibility that some policyholders may not understand their coverage limitations, and learn about them only after actually using long‐term care services. Greater consumer awareness of LTCI policy features and limitations may help reduce lapse rates and increase the stability of the LTCI market.