Life insurance demand under health shock risk

Christoph Hambel, Holger Kraft, Lorenz S. Schendel, Mogens Steffensen

Research output: Contribution to journalArticleScientificpeer-review

16 Citations (Scopus)


This article studies the consumption-investment-insurance problem of a family. The wage earner faces the risk of a health shock. The family can buy long-term life insurance that can only be revised at significant costs. A revision is only possible as long as the insured person is healthy. The combination of unspanned labor income and the stickiness of insurance decisions reduces the long-term insurance demand significantly. Since such a reduction is costly and families anticipate these potential costs, they buy less protection at all ages. In particular, young families stay away from long-term life insurance markets altogether.
Original languageEnglish
Pages (from-to)1171-1202
Number of pages32
JournalJournal of Risk and Insurance
Issue number4
Publication statusPublished - Dec 2017
Externally publishedYes


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