Long-Term Care Insurance Financing Using Home Equity Release: Evidence from an Online Experimental Survey
Date of this Version
This research was supported by the Australian Research Council Centre of Excellence in Population Ageing Research (CEPAR) (project number CE17010005). The project described was initiated through the University of Pennsylvania QUARTET competition and is supported by the National Institute on Aging, P30 AG012836-24; the National Institutes of Health, the Eunice Shriver Kennedy National Institute of Child Health and Development Population Research Infrastructure Program R24 HD044964-15; the Boettner Center for Pensions and Retirement Security and/or LDI CHIBE.
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.
long-term care insurance, housing, reverse mortgages, home reversion, China
Hanewald, Katja, Hazel Bateman, Hanming Fang, and Tin Long Ho. 2022. "Long-Term Care Insurance Financing Using Home Equity Release: Evidence from an Online Experimental Survey." University of Pennsylvania Population Center Working Paper (PSC/PARC), 2022-81. https://repository.upenn.edu/psc_publications/81.
Demography, Population, and Ecology Commons, Family, Life Course, and Society Commons, Finance Commons, Medicine and Health Commons
Date Posted: 19 January 2022