A Dynamic Analysis of the Demand for Life Insurance

Journal of Risk and Insurance, Forthcoming

31 Pages Posted: 21 Jan 2010 Last revised: 20 Jan 2012

See all articles by Andre P. Liebenberg

Andre P. Liebenberg

University of Mississippi - School of Business Administration

James M. Carson

University of Georgia

Randy E. Dumm

Florida State University - Department of Risk Management/Insurance, Real Estate and Business Law

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Date Written: December 29, 2011

Abstract

Prior research suggests that neither the choice to own life insurance nor the amount purchased is consistently related to the presence of children in the household. While these perplexing findings are based on a static framework, we alternatively examine life insurance demand in a dynamic framework as a function of changes in household life cycle and financial condition. Our results indicate both a statistically and economically significant relation between life events, such as new parenthood, and the demand for life insurance. We also provide new evidence in support of the emergency fund hypothesis: Households in which either spouse has become unemployed are more likely than other households to surrender their whole life insurance.

Keywords: Life Insurance Demand, Family Life Cycle, Survey of Consumer Finances, Emergency Fund Hypothesis

JEL Classification: G22

Suggested Citation

Liebenberg, Andre P. and Carson, James M. and Dumm, Randy E., A Dynamic Analysis of the Demand for Life Insurance (December 29, 2011). Journal of Risk and Insurance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1539609

Andre P. Liebenberg (Contact Author)

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

James M. Carson

University of Georgia ( email )

Athens, GA 30602-6254
United States

Randy E. Dumm

Florida State University - Department of Risk Management/Insurance, Real Estate and Business Law ( email )

College of Business
Tallahassee, FL 32306
United States

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