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Are Life Insurance Holdings Related to Financial Vulnerabilities?

Author

Listed:
  • B. Douglas Bernheim
  • Katherine Grace Carman
  • Jagadeesh Gokhale
  • Laurence J. Kotlikoff

Abstract

Using the 1995 Survey of Consumer Finances and an elaborate life-cycle model, we quantify the potential financial impact of each individual's death on his or her survivors and measure the degree to which life insurance moderates these consequences. Life insurance is essentially uncorrelated with financial vulnerability at every stage of the life cycle. As a result, the impact of insurance among at-risk households is modest, and substantial uninsured vulnerabilities are widespread, particularly among younger couples. We also identify a systematic gender bias: For any given level of financial vulnerability, couples provide significantly more protection for wives than for husbands. (JEL D10, G22) Copyright 2003, Oxford University Press.

Suggested Citation

  • B. Douglas Bernheim & Katherine Grace Carman & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2003. "Are Life Insurance Holdings Related to Financial Vulnerabilities?," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 531-554, October.
  • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:4:p:531-554
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    File URL: http://hdl.handle.net/10.1093/ei/cbg026
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    Citations

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    Cited by:

    1. David M. Cutler & Amy Finkelstein & Kathleen McGarry, 2008. "Preference Heterogeneity and Insurance Markets: Explaining a Puzzle of Insurance," American Economic Review, American Economic Association, vol. 98(2), pages 157-162, May.
    2. Louis Kaplow, 2005. "The Value of a Statistical Life and the Coefficient of Relative Risk Aversion," Journal of Risk and Uncertainty, Springer, vol. 31(1), pages 23-34, July.
    3. Li, Yue, 2017. "Economic Analysis of Social Security Survivors Insurance," MPRA Paper 84038, University Library of Munich, Germany.
    4. In Do Hwang, 2017. "Behavioral Aspects of Household Portfolio Choice: Effects of Loss Aversion on Life Insurance Uptake and Savings," Working Papers 2017-8, Economic Research Institute, Bank of Korea.
    5. repec:wfo:wstudy:60603 is not listed on IDEAS
    6. Katherine Grace Carman & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2003. "The Impact on Consumption and Saving of Current and Future Fiscal Policies," NBER Working Papers 10085, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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