Relatively few people own private long-term care insurance, even though long-term care is one of the largest financial risks currently facing older people. A new study suggests that poor numerical skills may explain a part of that phenomenon: people with better numerical skills (even after controlling for education and cognitive function) are more likely to hold long-term care insurance.
Given the complexity of this particular financial decision, it is not surprising that a lack of numerical skills would create barriers. Assessing the value of a private long-term care insurance policy involves a variety of calculations, such as determining the probability of needing care, evaluating the likely lifetime expense of premiums against the payments one could expect to receive, and comparing the costs and benefits of insurance against other strategies to manage the same risks. It is easy to feel overwhelmed by all this. A lack of skills to deal with all those numbers would certainly prevent people from making the best decisions for themselves.
As for so many problems, investing into education seems a good idea if we want to empower everyone to prepare well for their own future. In addition though, I think it’s important to directly offer people help with some of those complex decisions processes.
What do you think? How do you navigate such a complex financial decision?
Reference:
McGarry, B. E., Temkin-Greener, H., Chapman, B. P., Grabowski, D. C., & Li, Y. (2016). The Impact of Consumer Numeracy on the Purchase of Long-Term Care Insurance. Health Services Research, n/a–n/a (article first published online: 22 JAN 2016). http://doi.org/10.1111/1475-6773.12439
by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR