Lapses in Long-Term Care Insurance

Leora FriedbergWenliang HouWei SunAnthony Webb
Written By SCEPA

RELAB WORKING PAPER

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About a quarter of people with long-term care insurance let their policies lapse before they die.

This study shows that policyholders who enter nursing homes are more likely to let their insurance lapse due to cognitive impairment. For these individuals, long-term care insurance is worse than useless. They not only lose their premiums, but also spend down their wealth too rapidly, erroneously believing that their insurance policy will cover long-term care costs at older ages.

SCEPA
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