The Mismatch Between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Health and Retirement Study

This study examines life insurance holdings
and financial vulnerabilities among couples approaching retirement age. Two separate concerns motivate our analysis. First, there are
reasons to suspect that life insurance coverage
may be poorly correlated with underlying financial vulnerabilities. A well-known insurance industry adage holds that life insurance is “sold
and not bought.” Alternatively, households may
purchase long-term policies relatively early in
life, and subsequently fail to adjust coverage
appropriately because of inertia and/or other
psychological considerations. Second, households that purchase little or no life insurance
may leave either or both spouses at risk of
serious financial consequences