TY  - JOUR
AU  - Brown, Jeffrey R
TI  - Are the Elderly Really Over-Annuitized?  New Evidence on Life Insurance and Bequests
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7193
PY  - 1999
Y2  - June 1999
DO  - 10.3386/w7193
UR  - http://www.nber.org/papers/w7193
L1  - http://www.nber.org/papers/w7193.pdf
N1  - Author contact info:
Jeffrey R. Brown
Gies College of Business
University of Illinois at Urbana-Champaign
1206 S. Sixth Street
Champaign, IL 61820
Tel: 217/333-3322
E-Mail: brownjr@illinois.edu
M1  - published as Jeffrey Brown. "Are the Elderly Really Over-Annuitized? New Evidence on Life Insurance and Bequests ," in David A. Wise, editor, "Themes in the Economics of Aging" University of Chicago Press (2001)

AB  - This paper provides evidence against the hypothesis that elderly individuals with strong bequest motives purchase term life insurance to offset mandatory annuitization by the existing Social Security system.  Using new data on elderly households, this study is able to examine ownership of pure term life insurance separately from whole life, or cash-value, policies. This is an important distinction in the  Annuity Offset Model' because the central implication is that term insurance is purchased in order to  undo' excessive government annuitization in the form of Social Security, while whole life policies among the elderly primarily consist of tax deferred savings.  Evidence is presented that many households simultaneously choose to hold privately purchased annuities and term life insurance, a choice that is inconsistent with the notion that these individuals are over-annuitized.  Results also indicate that the hypothesized positive relationship between term insurance ownership and Social Security benefits does not hold once one analyzes term separately from cash value policies.  Previous empirical results appear to have been overly favorable to the Annuity Offset Model due to the inability to adequately account for the strong correlation between whole life insurance ownership and Social Security benefits, a correlation that can be attributed to tax-deferred savings and attempts to protect human capital during one's younger working life.  Because these findings suggest that households are not seeking to  undo' Social Security for bequest reasons, these results have implications for the current debate over annuitization options in an individual accounts retirement system.
ER  -