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

By Ralph S. J. Koijen, Stijn Van Nieuwerburgh, Motohiro Yogo. 2016

128 citations recorded by the source corpus.

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.

Subfields: Accounting, Demography, General Health Professions

View Paper: https://www.semanticscholar.org/paper/a49dcb7e387244f26046eaba16faaadb14bc337c

Citations in the corpus

• Savings After Retirement: A Survey (2016, unknown): “Koijen et al. (2016) propose a framework for summarizing the risk exposure of complex portfolios in the presence of mortality and medical expense risks.”