Long-term care insurance: Incentives for private purchase

The need for long-term medical care has been increasing in recent years and is projected to continue in the years ahead. With this increase, there is much concern about how to pay for long-term medical care. This study enhances current knowledge about long-term care insurance purchases. A logit model is developed and estimated that describes purchasing decisions, with the binary dependent variable indicating purchase or non-purchase of a long-term care insurance policy. Explanatory variables include individual characteristics, family structure, assets, proxies for information and knowledge, and the annual premium for long-term care insurance. Results confirm that several variables included in prior theoretical work do play a large role in the purchase decision. However, the influence of several key factors differs for consumers who are renewing LTC insurance versus consumers who are purchasing for the first time. This study provides strong empirical evidence that original purchase decisions differ systematically from renewal decisions.