Bequest Motives and the Demand for Life Insurance in East Germany

Abstract

Empirical studies of household saving remain inconclusive about the role of bequest motives. This may be due to the diluting effect of different tax regimes across countries and time on estimates of bequest motives. Relative to market‐based economies, the former German Democratic Republic can be viewed as an experimental institutional setting where life‐insurance demand was not influenced by tax considerations. This allows isolating bequest motives from other life‐cycle and precautionary savings motives. Analyzing the demand for life insurance, we find a significantly higher ownership probability among households with children and a high regard for the family, confirming bequest motives in life‐insurance demand.

Life insurance purchase behaviour: A systematic review and directions for future research

“…In general, the demand for the LIP increases as individuals grow a family and decreases as they age. This depicts that the consumers' age and the demand for the LIP are related non-linearly (Brighetti et al, 2014;Buric et al, 2017;Chen et al, 2001;Frees & Sun, 2010;Luciano et al, 2016;Sauter, 2014;Tan et al, 2009).…”

“…However, as individuals age, their probability of death increases, leading to a rise in the face value of LIP and high premium payments. A couple of studies only found a positive relationship between age and demand for life insurance since they considered respondents of age less than 55 years and of the mean age of 31 years, respectively (Sauter, 2014;Tan et al, 2009). In contrast, few studies also found the negative effect of age on demand for life insurance.…”

Tax incentives, bequest motives, and the demand for life insurance: evidence from a natural experiment in Germany

“…Although both find that bequest motives shape savings behavior, altruism toward one's children appears to be of only minor importance. In contrast, Inkmann and Michaelides (2012) and Sauter (2014) find evidence for the existence of bequest motives in life insurance demand among households with children as well as for married couples in the UK and the former German Democratic Republic, respectively.…”

Niskie stopy procentowe a ubezpieczenia na życie z ubezpieczeniowym funduszem kapitałowym na rynku niemieckim

“…Powy ej opisana sytuacja, szeroko rozumianej popularno ci takiej formy oszczdzania, ale równie lokowania kapita u, jest zwi zana z udogodnieniami, które by y oferowane podczas podpisywania takich umów (Sauter, 2014). Osoby zawieraj ce umow na ubezpieczenie na ycie nie p aci y podatku z generowanych zysków.…”