Article ID Journal Published Year Pages File Type
5076658 Insurance: Mathematics and Economics 2014 30 Pages PDF
Abstract
We determine how an individual can use life insurance to meet a bequest goal. We assume that the individual's consumption is met by an income from a job, pension, life annuity, or Social Security. Then, we consider the wealth that the individual wants to devote towards heirs (separate from any wealth related to the afore-mentioned income) and find the optimal strategy for buying life insurance to maximize the probability of reaching a given bequest goal. We consider life insurance purchased by a single premium, with and without cash value available. We also consider irreversible and reversible life insurance purchased by a continuously paid premium; one can view the latter as (instantaneous) term life insurance.
Keywords
Related Topics
Physical Sciences and Engineering Mathematics Statistics and Probability
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