Life cycle insurance, bequest motives and annuity loads

• Tác giả: Aleksandar Arandjelović, Geoffrey Kingston, Pavel V Shevchenko
• Ngôn ngữ: eng
• Ký hiệu phân loại: 811.0080354 American poetry in English
• Thông tin xuất bản: 2023
• Bộ sưu tập: Metadata
• ID: 198317

Tóm tắt

Comment: To appear in Journal of Economic Dynamics and ControlWe investigate insurance purchases when bequest motives are age-varying and life insurance and life annuities both carry loads. The existing life cycle literature assumes bequests are normal goods without being either necessities or luxuries. Much of the literature also assumes implicitly that life annuity loads are negative. A key finding of the literature is that the demand for life insurance and the demand for life annuities are symmetrical. It is optimal to buy life-contingent insurance throughout life, even under loads. A life annuity phase backs directly onto a life insurance phase. We find that realistic examples with positive loads on both products reveal up to two distinct periods of non-participation, one in midlife and the other adjoining the maximum age. We highlight examples with necessity bequests during child-rearing years and luxury bequests thereafter. This set of assumptions explains why a substantial demand for life insurance during child-rearing years can co-exist with negligible demand for life annuities later on. A realistic 18% load on both products generates this outcome.