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

Ralph S. J. Koijen, Stijn Van Nieuwerburgh and Motohiro Yogo

No 499, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: 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.

Keywords: lifecycle models; Health insurance; Annuities; Portfolio choice; Life insurance (search for similar items in EconPapers)
JEL-codes: D14 D91 G11 I13 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2014-06-11
New Economics Papers: this item is included in nep-dge, nep-hea and nep-ias
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Related works:
Journal Article: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2016)
Working Paper: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2011)
Working Paper: Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:499

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