Life Insurance, Precautionary Saving and Contingent Bequest
AbstractPurchasing life insurance is for the welfare of young children, par-ticularly preteens, who are liquidity constrained. In this paper, we present a life cycle model of life insurance that takes into account the ages of these young beneciaries. We show that, as the child ages, the need for protection is reduced and, consequently, the size of contingent bequest may shrink. The demand for life insurance is positively related to the number, age differentials, living standards, and the time needed to reach adulthood. Also, the breadwinner's life-time uncertainty and the unfairness of the insurance market encourage precautionary saving.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 444.
Date of creation: 2001
Date of revision:
Loading factor; birth order; actuarial rate of interest; and the age of independence;
Other versions of this item:
- Chang, Fwu-Ranq, 2004. "Life insurance, precautionary saving and contingent bequest," Mathematical Social Sciences, Elsevier, vol. 48(1), pages 55-67, July.
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