Long-Term Care Insurance Financing Using Home Equity Release: Evidence from an Online Experimental Survey

Katja Hanewald, Hazel Bateman (), Hanming Fang and Tin Long Ho

No 29689, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper explores new mechanisms to fund long-term care using housing wealth. Using data from an online experimental survey fielded to a sample of 1,200 Chinese homeowners aged 45-64, we assess the potential demand for new financial products that allow individuals to access their housing wealth to buy long-term care insurance. We find that access to housing wealth increases the stated demand for long-term care insurance. When they could only use savings, participants used on average 5% of their total (hypothetical) wealth to purchase long-term care insurance. When they could use savings and a reverse mortgage, participants used 15% of their total wealth to buy long-term care insurance. With savings and home reversion, they used 12%. Reverse mortgages do not require regular payments until the home is sold, while home reversion involves a partial sale and leaseback. Our results inform the design of new public or private sector programs that allow individuals to access their housing wealth while still living in their homes.

JEL-codes: D14 G11 G21 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias and nep-ure
Note: AG PE
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