Optimal Health and Longevity Insurance

Stijn Van Nieuwerburgh, Motohiro Yogo and Ralph Koijen

No 185, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: We derive the optimal portfolio of longevity products during the retirement phase. The households health state moves stochastically and the longevity products are priced consistent with equilibrium in the insurance market. The household has recursive preferences, which allows us to study the optimal cross-sectional and time-series allocation of risk. We show how our results modify in the presence of government social security, a market for health insurance, a market for life insurance if the household has a motive or bequest, and macroeconomic (systematic) longevity risk.

Date: 2009
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Working Paper: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2011)
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