Long-term care insurance and the family: does the availability of potential caregivers substitute for long-term care insurance?

The needs for long-term care (LTC) are expected to increase gradually due to population ageing in Europe. The population aged 65 or older, which is more at risk of dependency, will more than double by 2050 according to the forecasts of the European Union (Pestieau & Ponthière 2010). It is however unclear if the population in need for care will increase in the same proportion due to compression of morbidity (potential increase of life expectancy in good health). In assessing the adequacy of the financing and provision of long-term care, it is important to take into account the abilities of the countries to rely on the informal provision of care to older individuals in the future. Recent studies, using inter alia SHARE data (e.g. Bolin et al. 2008), showed that long-term care is mainly provided by informal caregivers. In this paper, we show that children and especially daughters play an important role in the supply of informal care. Then we prove that the availability of potential informal caregivers, i.e. the children, decreases the probability of purchasing private voluntary long-term care insurance. Future research on long-term care should focus on characteristics of potential substitutes for insurance policies (children and partner).