An examination of life insurance policy surrender and loan activity

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Título: An examination of life insurance policy surrender and loan activity / Cassandra R. Cole, Stephen G. Fier

Notas: Sumario: Extant literature has explored policyowner decision-making as it relates to both life insurance policy surrender and borrowing activity. However, researchers have not yet examined why individuals may select one option over the other. In this study, we investigate common hypotheses related to policy surrender and loan activity using approaches which allow us to examine the two options jointly while also accounting for the multidimensional nature of the decision-making process. We offer evidence consistent with the emergency fund, alternative funds, and policy replacement hypotheses as they relate to the decision to either surrender a policy or take out a policy loan and find that differential effects exist between the two options. In particular, our findings suggest that households tend to surrender their cash value policies when longer-term financial needs arise while temporary needs are more likely addressed with loans which keep the policy in force, each consistent with rational household decision-making.

Autores secundários: Fier, Stephen G.

Outras classificações: 341

Direitos: In Copyright (InC): http://rightsstatements.org/vocab/InC/1.0/