Up Next

Market-Based Solutions to Vital Economic Issues


Kenan Institute 2024 Grand Challenge: Business Resilience
Market-Based Solutions to Vital Economic Issues
Jan 1, 2021

Wealth and Insurance Choices: Evidence from U.S. Households


Theoretically, wealthier people should buy less insurance, and should self-insure through saving instead, as insurance entails monitoring costs. Here, we use administrative data for 63,000 individuals and, contrary to theory, find that those with more wealth have better life and property insurance coverage, controlling for the value of the assets insured. This puzzling positive wealth-insurance correlation is not explained by wealth-related differences in background risk, legal risk, liquidity constraints, financial literacy, or pricing, and is observed cross-sectionally, as well as within-person. These findings call for a better understanding of the demand and supply of this important aspect of households’ portfolios.

View Publication on Journal Site

You may also be interested in: