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Financial Protection for the Elderly - Contracts Based on Equity Release and Critical Health Insurance

Author

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  • Beata Zmyslona
  • Agnieszka Marciniuk

Abstract

Purpose: The purpose of the article is to present a new marriage contract combining the advantages of the reverse annuity contract and the critical health insurance contract. The content of the article focuses on the method of determining premiums and benefits related to this contract. Design/Methodology/Approach: The multistate model is used to describe the survival time of the spouses. The elements of transition probabilities matrix were estimated assuming that the stochastic process describing further life expectancy has Markov property. Empirical examples are presented on the basis of data concerning lung cancer taking into account the incidence, mortality and fatality rates from this disease. Findings: The obtained results indicate that older people can obtain additional financial resources which can improve the quality of life and raise its standard significantly. Moreover, additional financial protection can be ensured in case of a critical illness. Practical implications: The described contract can be used in practice as a form of providing additional financial resources supplementing the home budget of pensioners, especially in the event of a serious illness. The contract can also be used with the option of long-term care insurance. Despite the guaranteed free health care, such contracts can significantly increase the quality of life of patients during a chronic severe illness. Originality/Value: The model presented in the paper is original. It allows flexible modelling of cash flows to provide financial protection in case of low income during retirement and health deterioration of the elderly.

Suggested Citation

  • Beata Zmyslona & Agnieszka Marciniuk, 2020. "Financial Protection for the Elderly - Contracts Based on Equity Release and Critical Health Insurance," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 867-882.
    • Handle: RePEc:ers:journl:v:xxiii:y:2020:i:special1:p:867-882
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    References listed on IDEAS

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    1. Kathleen McGarry & Robert F. Schoeni, 2005. "Widow(er) Poverty and Out-of-Pocket Medical Expenditures Near the End of Life," The Journals of Gerontology: Series B, The Gerontological Society of America, vol. 60(3), pages 160-168.
    2. Joanna Dębicka & Stanisław Heilpern & Agnieszka Marciniuk, . "Application of Copulas to Modelling of Marriage Reverse Annuity Contract," Prague Economic Papers, University of Economics, Prague, vol. 0.
    3. Yılmaz Bayar, 2013. "Financial Sustainability of Pension Systems in the European Union," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 46-70.
    4. Joanna Dębicka & Stanisław Heilpern & Agnieszka Marciniuk, 2020. "Application of Copulas to Modelling of Marriage Reverse Annuity Contract," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(4), pages 445-468.
    5. O.S. Fisenko & V.K. Khegay & G.L. Stepanyan, 2018. "Innovative Approaches to the Organization of Social Service of Elderly People in a Management of the Social Work: Regional Experience," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 89-95.
    6. Andrei V. Vlasov, 2017. "Pension System as a Demographic Recession Factor," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 443-452.
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    Cited by:

    1. Agnieszka Marciniuk & Beata Zmyślona, 2022. "Marriage and Individual Equity Release Contracts with Dread Disease Insurance as a Tool for Managing the Pensioners’ Budget," Risks, MDPI, vol. 10(7), pages 1-15, July.

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    More about this item

    Keywords

    Financial protection; reverse annuity contract; critical health insurance contract; multistate model; stationary Markov chain.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J1 - Labor and Demographic Economics - - Demographic Economics

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