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Late-in-Life Risks and the Under-Insurance Puzzle

John Ameriks (), Joseph Briggs (), Andrew Caplin (), Matthew Shapiro and Christopher Tonetti ()

No 22726, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Individuals face significant late-in-life risks, including needing long-term care (LTC). Yet, they hold little long-term care insurance (LTCI). Using both “strategic survey questions,” which identify preferences, and stated demand questions, this paper investigates the degree to which a fundamental lack of interest and poor product features determine low LTCI holdings. It estimates a rich set of individual-level preferences and uses a life-cycle model to predict insurance demand, finding that better insurance would be far more widely held than are products in the market. Comparing stated and model-predicted demand shows that flaws in existing products provide a significant, but partial, explanation for this under-insurance puzzle.

JEL-codes: D14 D91 E21 G22 H31 I13 J14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias and nep-mac
Date: 2016-10
Note: AG HE EFG ME PR
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Working Paper: Late-in-Life Risks and the Under-Insurance Puzzle (2016) Downloads
Working Paper: Late-in-Life Risks and the Under-Insurance Puzzle (2016)
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