Understanding the Shift in Demand for Cash Value Life Insurance

30 Pages Posted: 21 Mar 2016

See all articles by Barry S. Mulholland

Barry S. Mulholland

University of Akron - Department of Finance

Michael S. Finke

The American College

Sandra J. Huston

Texas Tech University

Multiple version iconThere are 2 versions of this paper

Date Written: Spring 2016

Abstract

Ownership of cash value life insurance in the United States has fallen in recent decades. Changes in age cohorts, family composition, and tax laws may have contributed to this decline. We identify factors that influence the demand for cash value life insurance and test whether they alone can explain the sharp decline in ownership. Demographic and tax code changes do not explain the decrease in permanent insurance. There is a consistent downward trend in demand from 1992 to 2010 - particularly among middle‐age and younger households. The fewer households who own cash value policies are on average wealthier and more financially sophisticated, suggesting that permanent life insurance is increasingly being used as a tax shield rather than as a hedge against a loss in human capital.

Suggested Citation

Mulholland, Barry S. and Finke, Michael S. and Huston, Sandra J., Understanding the Shift in Demand for Cash Value Life Insurance (Spring 2016). Risk Management and Insurance Review, Vol. 19, Issue 1, pp. 7-36, 2016. Available at SSRN: https://ssrn.com/abstract=2752193 or http://dx.doi.org/10.1111/rmir.12031

Barry S. Mulholland (Contact Author)

University of Akron - Department of Finance ( email )

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Akron, OH 44325-4803
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HOME PAGE: http://www.uakron.edu/cba/departments/finance/financial-planning.dot

Michael S. Finke

The American College ( email )

Bryn Mawr, PA 19010
United States

Sandra J. Huston

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

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