Household Life Insurance Gap Economists Puzzles

What would you like to know

  • The research looked at four years of data from a large financial services company to study risk protection buying models.
  • The wealthiest people in the sample use term life insurance and property insurance more.
  • The gap persisted even after economists adjusted many variables that appeared to be able to explain the difference.

Richer Americans have more resources they can use to protect themselves against risk, but even after controlling for many different factors, they seem to buy more insurance.

Michael Gropper and Camelia Kuhnen, economists at the University of North Carolina at Chapel Hill, reported on this apparent wealth coverage gap in a new working document distributed by the National Bureau of Economic Research.

A discussion paper is a document that has not yet gone through a full peer review process.

Gropper and Kuhnen based their analysis on data from 63,000 clients of a large financial services firm. The records included data collected from September 2015 to March 2019.

Economists have found that there is a similar coverage gap for owning term life insurance as well as using home and other forms of property and casualty insurance. This is so even though conventional wisdom suggests that the wealthiest people like permanent life insurance because of the way policyholders can use permanent life insurance agreements to reduce or defer taxes on. investment gains.

“Whether we measure wealth by the value of financial assets or by the value of homes that individuals own, we find that life insurance coverage as well as property insurance coverage increases with wealth, controlling for value of the insured asset, ”the economists write in the paper. “


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