The Demand for Life Insurance Policy Loans
Journal of Risk and Insurance, Forthcoming
25 Pages Posted: 27 Sep 2007 Last revised: 22 Jun 2016
Date Written: July 27, 2009
Previous research has examined the demand for life insurance policy loans using aggregate policy loan data. In contrast, we use a detailed household survey dataset containing life insurance and policy loan information to alternatively, and in some cases more directly, examine the four hypotheses traditionally associated with policy loan demand. Our research provides the first U.S. evidence (in the post-World War II period) in support of the policy loan emergency fund hypothesis. In particular, we find that the more detailed emergency fund proxies used here reveal a significantly positive relation between loan demand and recent expense or income shocks.
Keywords: Life Insurance, Policy Loans, Emergency Fund Hypothesis, Survey of Consumer Finances
JEL Classification: G22, E50
Suggested Citation: Suggested Citation