Working Paper: NBER ID: w1737
Authors: Alan J. Auerbach; Laurence J. Kotlikoff
Abstract: Despite a general reduction in poverty among the aged, roughly one third of elderly nonmarried women are officially poor. Many of these women are widows.The fact that poverty rates are significantly larger for widows than for married women suggests that many households may fail to buy sufficient life insurance.This paper considers the adequacy and determinants of life insurance among the elderly. Its principal conclusions are:(1) Combined private and public life insurance is inadequate for a significant minority of elderly households;(2) Of those elderly households in which the husband's future income representsa significant fraction of total household resources, roughly half are inadequately insured;(3) Households do not significantly offset Social Security's provision of survivor insurance by reducing their private purchase of life insurance; and(4) The actual determinants of the purchase of life insurance appear to differ greatly from those predicted by economic theory.
Keywords: life insurance; elderly; poverty; social security; insurance adequacy
JEL Codes: H55; I13; J14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| inadequate life insurance (G52) | poverty among widows (I32) |
| absence of sufficient life insurance (G52) | increased poverty risk (I32) |
| social security survivor insurance presence (H55) | no decrease in private life insurance purchases (G52) |
| determinants of life insurance purchases differ from economic models (G52) | mismatch between theoretical expectations and actual behavior (D84) |