Why Aren't More Families Buying Life Insurance?

Matthew Chambers (), Don Schlagenhauf and Eric Young

Working Papers, Center for Retirement Research at Boston College from Center for Retirement Research

Abstract: This paper explores life insurance holdings from a general equilibrium perspective. Drawing on the data explored in Chambers, Schlagenhauf, and Young (2003), we calibrate an overlapping generation’s life cycle economy with incomplete asset markets to match facts regarding the uncertainty of income and demographics. We then estimate that life insurance holdings for the purpose of smoothing family consumption are so large that they constitute a puzzle from the perspective of standard economic theory. Furthermore, the welfare gains from a life insurance market are concentrated in the minds of households who use the real world market very little.

Pages: 49 pages
Date: 2011-03, Revised 2011-03
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Published on the Center for Retirement Research website

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Persistent link: https://EconPapers.repec.org/RePEc:crr:crrwps:wp2011-7

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