The Mismatch between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Survey of Consumer Finances

46 Pages Posted: 18 Oct 2001 Last revised: 18 Jan 2002

See all articles by B. Douglas Bernheim

B. Douglas Bernheim

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Katherine Grace Carman

RAND Corporation

Jagadeesh Gokhale

Cato Institute

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Date Written: October 2001

Abstract

Using the 1995 Survey of Consumer Finances and an elaborate life-cycle model, we quantify the potential financial impact of each individual's death on his or her survivors, and we measure the degree to which life insurance moderates these consequences. Life insurance is essentially uncorrelated with financial vulnerability at every stage of the life cycle. As a result, the impact of insurance among at-risk households is modest, and substantial uninsured vulnerabilities are widespread, particularly among younger couples. Roughly two-thirds of poverty among surviving women and more than one-third of poverty among surviving men results from a failure to insure survivors against an undiminished living standard. We also identify a systematic gender bias: for any given level of financial vulnerability, couples provide significantly more protection for wives than for husbands.

Suggested Citation

Bernheim, B. Douglas and Carman, Katherine Grace and Gokhale, Jagadeesh and Kotlikoff, Laurence J., The Mismatch between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Survey of Consumer Finances (October 2001). NBER Working Paper No. w8544. Available at SSRN: https://ssrn.com/abstract=287742

B. Douglas Bernheim (Contact Author)

Stanford University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Katherine Grace Carman

RAND Corporation ( email )

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Jagadeesh Gokhale

Cato Institute ( email )

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Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Gaidar Institute for Economic Policy

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Moscow, 125993
Russia

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