Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice

TitleHealth and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice
Publication TypeJournal Article
Year of Publication2016
AuthorsKoijen, RSJ, Van Nieuwerburgh, S, Yogo, M
JournalJournal of Finance
Volume71
Issue2
Pagination957-1010
KeywordsHealth Conditions and Status, Insurance, Net Worth and Assets, Pensions
Abstract

We develop a pair of risk measures, health and mortality delta, for the universe of life and health insurance products. A life-cycle model of insurance choice simplifies to replicating the optimal health and mortality delta through a portfolio of insurance products. We estimate the model to explain the observed variation in health and mortality delta implied by the ownership of life insurance, annuities including private pensions, and long-term care insurance in the Health and Retirement Study. For the median household aged 51 to 57, the lifetime welfare cost of market incompleteness and suboptimal choice is 3.2 of total wealth.

Notes

Times Cited: 0 0

DOI10.1111/jofi.12273
Endnote Keywords

mortality/life Insurance/annuities/pensions

Endnote ID

999999

Citation Key8368