Life insurance purchasing to maximize utility of household consumption

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      <subfield code="a">Bayraktar, Erhan</subfield>
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      <subfield code="a">Life insurance purchasing to maximize utility of household consumption</subfield>
      <subfield code="c">Erhan Bayraktar, Virginia R. Young</subfield>
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      <subfield code="a">We determine the optimal amount of life insurance for a household of two wage earners. We consider the simple case of exponential utility, thereby removing wealth as a factor in buying life insurance, while retaining the relationship among life insurance, income, and the probability of dying and thus losing that income. For insurance purchased via a single premium or premium payable continuously, we explicitly determine the optimal death benefit. We show that if the premium is determined to target a specific probability of loss per policy, then the rates of consumption are identical under single premium or continuously payable premium. Thus, not only is equivalence of consumption achieved for the households under the two premium schemes, it is also obtained for the insurance company in the sense of equivalence of loss probabilities.</subfield>
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      <subfield code="w">MAP20077000239</subfield>
      <subfield code="t">North American actuarial journal</subfield>
      <subfield code="d">Schaumburg : Society of Actuaries, 1997-</subfield>
      <subfield code="x">1092-0277</subfield>
      <subfield code="g">03/06/2013 Tomo 17 Número 2 - 2013 </subfield>
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