The Adequacy of Life Insurance: Evidence from the Health and Retirement Survey

B. Douglas Bernheim (), Lorenzo Forni (), Jagadeesh Gokhale and Laurence Kotlikoff ()

No 7372, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study examines the adequacy of life insurance among married American couples approaching retirement. It improves upon previous work in two ways. First, it is based on recent, high quality data (the 1992 Health and Retirement Survey with matched Social Security earnings histories). Second, it employs new financial planning software to evaluate the life insurance needs of each household. This software embodies an elaborate life- cycle planning model that accounts for a broad array of demographic, economic, and financial characteristics. We find that a sizable minority of couples in the HRS sample are significantly underinsured. Almost one third of wives and more than 10 percent of husbands would have suffered living standard reductions of 20 percent or more had their spouses died in 1992. Underinsurance tends to be more common among low income households, couples with asymmetric earnings, younger households, couples with dependent children, and non-whites. In general, households with greater vulnerabilities do not appear to compensate adequately for these vulnerabilities through greater life insurance holdings. Among some groups, the frequency of underinsurance exceeds two-thirds, and the frequency of severe underinsurance (a reduction in living standard of 40 percent or greater) exceeds one-quarter.

JEL-codes: G22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea, nep-ias, nep-lab, nep-pbe and nep-pub
Date: 1999-10
Note: AG PE
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w7372.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: The adequacy of life insurance: evidence from the health and retirement survey (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:7372

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7372
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().