Analysis on Insurance Decisions of Risk Underestimated in Long-Term Care Insurance

Aimed to the common individual psychological factors of 'risk underestimating', the article analyzes the long-term care insurance decision of individual using life-cycle model, and the result indicates that if the insured underestimated their own long-term care risk at the first stage, they will choose to defer coverage. Meanwhile, the article presents the insured should choose different insurance decisions under different risk underestimating levels using numerical simulations, as well as the impactions on insurance decision by changes of the factors such as cost of care, income in the first stage etc..