Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice

Ralph Koijen, Stijn Van Nieuwerburgh and Motohiro Yogo

No 17325, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a pair of risk measures, health and mortality delta, for the universe of life and health insurance products. A life-cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products. We estimate the model to explain the observed variation in health and mortality delta implied by the ownership of life insurance, annuities including private pensions, and long-term care insurance in the Health and Retirement Study. For the median household aged 51 to 57, the lifetime welfare cost of market incompleteness and suboptimal choice is 3.2% of total wealth.

JEL-codes: D14 D91 G11 I13 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-age, nep-hea and nep-ias
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Citations: View citations in EconPapers (8)

Published as Ralph S.J. Koijen & Stijn Nieuwerburgh & Motohiro Yogo, 2016. "Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice," Journal of Finance, American Finance Association, vol. 71(2), pages 957-1010, 04.

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Related works:
Journal Article: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2016)
Working Paper: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2014)
Working Paper: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2011)
Working Paper: Optimal Health and Longevity Insurance (2009)
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