Long-Term Care Insurance Financing Using Home Equity Release: Evidence from an Online Experimental Survey

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.