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The adequacy of life insurance: evidence from the health and retirement survey

Author

Listed:
  • B. Douglas Bernheim
  • Lorenzo Forni
  • Jagadeesh Gokhale
  • Laurence J. Kotlikoff

Abstract

This study examines life insurance adequacy among married American couples approaching retirement based on the 1992 Health and Retirement Survey with matched Social Security earnings histories. It evaluates each household's life insurance needs based on new financial planning software that embodies a life-cycle-planning model and covers a broad array of demographic, economic, and financial characteristics. A sizable minority of households are significantly underinsured. Almost one third of wives and over 10 percent of husbands would have suffered living-standard reductions greater than 20 percent had their spouses died in 1992.

Suggested Citation

  • B. Douglas Bernheim & Lorenzo Forni & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1999. "The adequacy of life insurance: evidence from the health and retirement survey," Working Paper 9914, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:9914
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    References listed on IDEAS

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    1. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    2. Auerbach, Alan J. & Kotlikoff, Laurence J., 1991. "The adequacy of life insurance purchases," Journal of Financial Intermediation, Elsevier, vol. 1(3), pages 215-241, June.
    3. Alan J. Auerbach & Laurence J. Kotlikoff, 1985. "Life Insurance of the Elderly: Adequacy and Determinants," NBER Working Papers 1737, National Bureau of Economic Research, Inc.
    4. Olivia S. Mitchell & James F. Moore, "undated". "Retirement Wealth Accumulation and Decumulation: New Developments and Outstanding Opportunities," Pension Research Council Working Papers 97-8, Wharton School Pension Research Council, University of Pennsylvania.
    5. Alan J. Auerbach & Laurence Kotlikoff, 1991. "Life Insurance Inadequacy - Evidence From a Sample of Older Widows," NBER Working Papers 3765, National Bureau of Economic Research, Inc.
    6. Bernheim, B. Douglas, 1987. "The economic effects of social security : Toward a reconciliation of theory and measurement," Journal of Public Economics, Elsevier, vol. 33(3), pages 273-304, August.
    7. James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
    8. David C. King & Richard J. Zeckhauser, 1999. "Congressional Vote Options," NBER Working Papers 7342, National Bureau of Economic Research, Inc.
    9. Ringen, Stein, 1991. "Households, Standard of Living, and Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(1), pages 1-13, March.
    10. Nathan S. Balke & Robert J. Gordon, 1986. "The Estimation of Prewar GNP Volatility, 1869-1938," NBER Working Papers 1999, National Bureau of Economic Research, Inc.
    11. Michael D. Hurd & David A. Wise, 1989. "The Wealth and Poverty of Widows: Assets Before and After the Husband's Death," NBER Chapters,in: The Economics of Aging, pages 177-200 National Bureau of Economic Research, Inc.
    12. Robert E. Lipsey, 1999. "Foreign Production by U.S. Firms and Parent Firm Employment," NBER Working Papers 7357, National Bureau of Economic Research, Inc.
    13. Nelson, Julie A, 1992. "Methods of Estimating Household Equivalence Scales: An Empirical Investigation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(3), pages 295-310, September.
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    Citations

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    Cited by:

    1. B. Douglas Bernheim, 2000. "How Much Should Americans Be Saving for Retirement?," American Economic Review, American Economic Association, vol. 90(2), pages 288-292, May.
    2. repec:dau:papers:123456789/3512 is not listed on IDEAS
    3. Martin S. Feldstein & Elena Ranguelova, 2002. "The Economics of Bequests in Pensions and Social Security," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 371-400 National Bureau of Economic Research, Inc.
    4. B. Douglas Bernheim & Lorenzo Forni & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2003. "The Mismatch Between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Health and Retirement Study," American Economic Review, American Economic Association, vol. 93(1), pages 354-365, March.
    5. B. Douglas Bernheim & Lorenzo Forni & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2001. "The mismatch between life insurance holdings and financial vulnerabilities: evidence from the Health and Retirement Survey," Working Paper 0109, Federal Reserve Bank of Cleveland.
    6. Aura, Saku, 2005. "Does the balance of power within a family matter? The case of the Retirement Equity Act," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1699-1717, September.

    More about this item

    Keywords

    Insurance ; Life insurance companies;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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