The Mismatch Between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Survey of Consumer Finances

B. Douglas Bernheim, Katherine Grace Carman, Jagadeesh Gokhale, Laurence J. Kotlikoff

NBER Working Paper No. 8544
Issued in October 2001
NBER Program(s):Aging, Public Economics

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 we 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. Roughly two-thirds of poverty among surviving women and more than one-third of poverty among surviving men results from a failure to insure survivors against an undiminished living standard. We also identify a systematic gender bias: for any given level of financial vulnerability, couples provide significantly more protection for wives than for husbands.

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Document Object Identifier (DOI): 10.3386/w8544

Published: Bernheim, B. Douglas, Katherine Grace Carman, Jagadeesh Gokhale and Laurence J. Kotlikoff. "Are Life Insurance Holdings Related To Financial Vulnerabilities?," Economic Inquiry, 2003, v41(4,Oct), 531-554.

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