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The Demand for Life Insurance Policy Loans

Author

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  • Andre P. Liebenberg
  • James M. Carson
  • Robert E. Hoyt

Abstract

Previous research has examined the demand for life insurance policy loans using aggregate policy loan data. In contrast, we use a detailed household survey data set containing life insurance and policy loan information to alternatively, and in some cases more directly, examine the four hypotheses traditionally associated with policy loan demand. Our research provides the first U.S. evidence (in the post–World War II period) in support of the policy loan emergency fund hypothesis. In particular, we find that the more detailed emergency fund proxies used here reveal a significantly positive relation between loan demand and recent expense or income shocks.

Suggested Citation

  • Andre P. Liebenberg & James M. Carson & Robert E. Hoyt, 2010. "The Demand for Life Insurance Policy Loans," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 651-666, September.
    • Handle: RePEc:bla:jrinsu:v:77:y:2010:i:3:p:651-666
    DOI: 10.1111/j.1539-6975.2010.01359.x
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    References listed on IDEAS

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    1. Pesando, James E, 1974. "The Interest Sensitivity of the Flow of Funds through Life Insurance Companies: An Econometric Analysis," Journal of Finance, American Finance Association, vol. 29(4), pages 1105-1121, September.
    2. Weiyu Kuo & Chenghsien Tsai & Wei‐Kuang Chen, 2003. "An Empirical Study on the Lapse Rate: The Cointegration Approach," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 489-508, September.
    3. Michael S. Gutter & Charles B. Hatcher, 2008. "Racial Differences in the Demand for Life Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 677-689, September.
    4. Yijia Lin & Martin F. Grace, 2007. "Household Life Cycle Protection: Life Insurance Holdings, Financial Vulnerability, and Portfolio Implications," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(1), pages 141-173, March.
    5. Schott, Francis H, 1971. "Disintermediation Through Policy Loans at Life Insurance Companies," Journal of Finance, American Finance Association, vol. 26(3), pages 719-729, June.
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    7. Outreville, J. Francois, 1990. "Whole-life insurance lapse rates and the emergency fund hypothesis," Insurance: Mathematics and Economics, Elsevier, vol. 9(4), pages 249-255, December.
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    Cited by:

    1. Dorothea Diers & Martin Eling & Christian Kraus & Andreas Reuß, 2012. "Market-consistent embedded value in non-life insurance: how to measure it and why," Journal of Risk Finance, Emerald Group Publishing, vol. 13(4), pages 320-346, August.
    2. Uddin, Mohammed Ahmar, 2017. "Microinsurance in India: Insurance literacy and demand," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(2).
    3. Lin, Jyh-Horng & Li, Xuelian, 2017. "Regulatory policies on Gramm-Leach-Bliley consolidation of commercial banking, shadow banking, and life insurance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 69-84.
    4. Kozmenko, Olha & Roienko, Victoria, 2013. "Evaluation and use of indicators of insurance companies’ investment activities," MPRA Paper 50850, University Library of Munich, Germany.
    5. Mohammed Ahmar Uddin, 2017. "Microinsurance in India: Insurance literacy and demand," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(2), pages 182-191, May.
    6. Ning Wang, 2023. "A dynamic analysis of the demand for life insurance during the 2008 financial crisis: evidence from the panel Survey of Consumer Finances," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 733-759, October.
    7. Nolte, Sven & Schneider, Judith C., 2017. "Don’t lapse into temptation: a behavioral explanation for policy surrender," Journal of Banking & Finance, Elsevier, vol. 79(C), pages 12-27.
    8. Michael D. Eriksen & James M. Carson, 2017. "A Burning Question: Does Arson Increase When Local House Prices Decline?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(1), pages 7-34, March.
    9. Mohammad Farhan Khan & Farnaz Haider & Ahmed Al-Hmouz & Mohammad Mursaleen, 2021. "Development of an Intelligent Decision Support System for Attaining Sustainable Growth within a Life Insurance Company," Mathematics, MDPI, vol. 9(12), pages 1-22, June.
    10. J. Birkenmaier & Q. Fu, 2019. "Does U.S. Household Financial Access Mediate the Relationship Between a Large Income Drop and Credit Record?," Journal of Consumer Policy, Springer, vol. 42(2), pages 267-283, June.
    11. Srbinoski Bojan & Strozzi Fernanda & Poposki Klime & Born Patricia H., 2020. "Trends in Life Insurance Demand and Lapse Literature," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 14(2), pages 1-46, July.
    12. Cassandra R. Cole & Stephen G. Fier, 2021. "An examination of life insurance policy surrender and loan activity," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(2), pages 483-516, June.

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