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Understanding the Shift in Demand for Cash Value Life Insurance
Author(s) -
Mulholland Barry,
Finke Michael,
Huston Sandra
Publication year - 2015
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/rmir.12031
Subject(s) - life insurance , cash , economics , demographic economics , business , value (mathematics) , monetary economics , labour economics , actuarial science , finance , machine learning , computer science
Ownership of cash value life insurance in the United States has fallen in recent decades. Changes in age cohorts, family composition, and tax laws may have contributed to this decline. We identify factors that influence the demand for cash value life insurance and test whether they alone can explain the sharp decline in ownership. Demographic and tax code changes do not explain the decrease in permanent insurance. There is a consistent downward trend in demand from 1992 to 2010—particularly among middle‐age and younger households. The fewer households who own cash value policies are on average wealthier and more financially sophisticated, suggesting that permanent life insurance is increasingly being used as a tax shield rather than as a hedge against a loss in human capital.