The Demand for Life Insurance: An Empirical Approach

In the standard (Yaari) framework, life insurance is demanded by the insured: a consumer who faces an uncertain lifetime; whereas in my model life insurance is demanded by the beneficiaries, dependents of the insured who face an income stream contingent on the insured's lifetime. The model is tested with household-level data on life insurance ownership in the U.S. in 1976. The results imply that beneficiaries' degree of relative risk aversion is about 1.2. Also, Social security survivors benefits sharply reduce life insurance ownership by households with offspring.