Role of Private Long-Term Care Insurance in Financial Sustainability for an Aging Society

This work analyzes and quantifies the significance of private long-term care insurance for the elderly in protecting families from the increased expenses derived from dependency. We propose an economic and financial model for consumption and income deficit evolution. Survival/dependency are modeled...

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Bibliographic Details
Published in:Sustainability 2020-11, Vol.12 (21), p.8894
Main Authors: Boj del Val, Eva, Claramunt Bielsa, M. Mercè, Varea Soler, Xavier
Format: Article
Language:English
Subjects:
Age
Aging
Cluster analysis
Consumption
Cost control
Family structure
Geriatrics
Households
Hypotheses
Insurance
Insurance coverage
Liquidity
Long term care insurance
Long term health care
Long-term care
Markov processes
Older people
Pensions
Present value
Random variables
Retirement
Stochastic processes
Stochasticity
Sustainability
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Summary:This work analyzes and quantifies the significance of private long-term care insurance for the elderly in protecting families from the increased expenses derived from dependency. We propose an economic and financial model for consumption and income deficit evolution. Survival/dependency are modeled by a Markov process with stochastic simulation techniques to obtain random variable distributions. Based on the Spanish survey of household finances data, Spanish families are classified using a cluster analysis for the wealth decumulation period. The conclusion is that, for a generic family, hiring long-term care insurance causes a significant reduction in the probability of lack of liquidity, the mean first time of lack of liquidity (if it occurs), and the mean present value of overall liquidity needs. It is also observed that there are important differences between these impacts on different groups of families. These results show that hiring long-term care insurance would considerably lower financial problems in the decumulation period.
ISSN:2071-1050
2071-1050
DOI:10.3390/su12218894