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dc.creatorKraft, Holger
dc.creatorSchendel, Lorenz S.
dc.creatorSteffensen, Mogens
dc.date.accessioned2021-09-28T09:18:49Z
dc.date.available2021-09-28T09:18:49Z
dc.date.issued2015-06-03
dc.identifier.urihttps://fif.hebis.de/xmlui/handle/123456789/2141
dc.description.abstractThis paper studies the life cycle consumption-investment-insurance problem of a family. The wage earner faces the risk of a health shock that significantly increases his probability of dying. The family can buy long-term life insurance that can only be revised at significant costs, which makes insurance decisions sticky. Furthermore, a revision is only possible as long as the insured person is healthy. A second important feature of our model is that the labor income of the wage earner is unspanned. We document that the combination of unspanned labor income and the stickiness of insurance decisions reduces the long-term insurance demand significantly. This is because an income shock induces the need to reduce the insurance coverage, since premia become less affordable. Since such a reduction is costly and families anticipate these potential costs, they buy less protection at all ages. In particular, young families stay away from long-term life insurance markets altogether. Our results are robust to adding short-term life insurance, annuities and health insurance.
dc.rightsAttribution-ShareAlike 4.0 International
dc.rights.urihttp://creativecommons.org/licenses/by-sa/4.0/
dc.subjectHousehold Finance
dc.titleLife Insurance Demand under Health Shock Risk
dc.typeWorking Paper
dcterms.referenceshttps://fif.hebis.de/xmlui/handle/123456789/1524?ZfKD
dc.source.filename40_SSRN-id2392384
dc.identifier.safeno40
dc.subject.keywordshealth shocks
dc.subject.keywordsportfolio choice
dc.subject.keywordsterm life insurance
dc.subject.keywordsmortality risk
dc.subject.keywordslabor income risk
dc.subject.jelD14
dc.subject.jelD91
dc.subject.jelG11
dc.subject.jelG22
dc.subject.topic1fraction
dc.subject.topic1optimization
dc.subject.topic1rate
dc.subject.topic2reduction
dc.subject.topic2period
dc.subject.topic2diagonal
dc.subject.topic3portfolio
dc.subject.topic3benchmark
dc.subject.topic3life
dc.subject.topic1nameConsumption
dc.subject.topic2nameMonetary Policy
dc.subject.topic3nameHousehold Finance
dc.identifier.doi10.2139/ssrn.2392384


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