Pricing a contract of linking home reversion plan and long-term care insurance via the principle of equivalent utility

Pricing a contract of linking home reversion plan and long-term care insurance via the principle... Home reversion plans allow homeowners to tap into the value of their house and live in it until their death. The article considers a contract linking home reversion plan and long-term care insurance, which could better prepare seniors for their retirement and long-term care needs. Here, we assume the product exposes an insurer to two risks: the uncertainty of nursing care cost from disable, and the home value decreasing in real estate markets at the time of sale. Because the market is incomplete, we apply the principle of equivalent utility to price the contract under exponential utility. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Quality & Quantity Springer Journals

Pricing a contract of linking home reversion plan and long-term care insurance via the principle of equivalent utility

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Publisher
Springer Netherlands
Copyright
Copyright © 2010 by Springer Science+Business Media B.V.
Subject
Social Sciences; Methodology of the Social Sciences; Social Sciences, general
ISSN
0033-5177
eISSN
1573-7845
D.O.I.
10.1007/s11135-009-9308-x
Publisher site
See Article on Publisher Site

Abstract

Home reversion plans allow homeowners to tap into the value of their house and live in it until their death. The article considers a contract linking home reversion plan and long-term care insurance, which could better prepare seniors for their retirement and long-term care needs. Here, we assume the product exposes an insurer to two risks: the uncertainty of nursing care cost from disable, and the home value decreasing in real estate markets at the time of sale. Because the market is incomplete, we apply the principle of equivalent utility to price the contract under exponential utility.

Journal

Quality & QuantitySpringer Journals

Published: Jan 14, 2010

References

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