Uncertain bequest needs and long-term Insurance contracts

Arbeitspapier

We examine how long-term life insurance contracts can be designed to incorporate uncertain future bequest needs. An individual who buys a life insurance contract early in life is often uncertain about the future financial needs of his or her family, in the event of an untimely death. Ideally, the individual would like to insure the risk of having high future bequest needs; but since bequest motives are typically unverifiable, a contract directly insuring these needs is not feasible. We derive two equivalent long-term life insurance contracts that are incentive compatible and achieve a higher welfare level than the naïve strategy of delaying the purchase of insurance until after one's bequest needs are known. We also examine the welfare effects of such contracts and we show how third-party financial products, although beneficial to the individual in the short run, can be welfare decreasing over one's lifetime.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 2505

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Insurance; Insurance Companies; Actuarial Studies
• Thema: Asymmetric information ; bequest needs ; life insurance ; Lebensversicherung ; Konsumtheorie ; Erbe ; Asymmetrische Information ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Fei, Wenan ; Fluet, Claude ; Schlesinger, Harris
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2008

Weitere Informationen

• Handle: http://hdl.handle.net/10419/26550
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ