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Home equity commitment and long-term care insurance demand

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  • Davidoff, Thomas

Abstract

This paper shows how home equity may substitute for long-term care insurance (LTCI). The elderly commonly hold substantial wealth in the form of home equity that is rarely spent before death, except for after moves to long-term care facilities. Absent strong bequest motives implies that marginal utility fluctuates less across health states than one would predict based on a standard model without wealth tied up in housing. Numerical examples show that this "asset commitment" may substantially weaken LTCI demand.

Suggested Citation

  • Davidoff, Thomas, 2010. "Home equity commitment and long-term care insurance demand," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 44-49, February.
    • Handle: RePEc:eee:pubeco:v:94:y:2010:i:1-2:p:44-49
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    References listed on IDEAS

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