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

Abstract

This paper studies the role of taxation and bequest motives in households' demand for life insurance. We develop a stylized three-period life cycle model of life insurance demand and test its predictions regarding tax changes and bequests motives. An unexpected halving of the tax exemption limit for interest and dividend income in Germany allows us to identify the impact of changes in taxation on the demand for life insurance in a difference-indifferences setting. In line with our theoretical predictions, we document that ownership of life insurance products increased significantly among households affected by the reform. We also find some evidence of a more pronounced response among households with stronger bequest motives.JEL CODES: D91, C25, D14, G11

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

“…Ubezpieczenia na ycie s w Niemczech drugim pod wzgl dem popularno ci wyborem zabezpieczenia czy te lokowania kapita u. W badaniach przeprowadzonych w 2012 roku, a 18% ankietowanych zadeklarowa o posiadanie ubezpieczenia na ycie. W tej kwestii tylko konta oszcz dno ciowe w bankach cieszy y si wi ksz popularno ci (Sauter, Walliser i Winter, 2015).…”

“…Dodatkowo wa ny by fakt, i wi kszo podpisanych polis posiada a w swoich zapisach aneks o gwarancji zachowania kapita u, a wi c ca e ryzyko zwi zane z inwestycj sta o po stronie ubezpieczyciela. Tego typu regulacje zosta y cz ciowo zmienione z pocz tkiem 2000 i 2005 roku (Sauter, Walliser i Winter, 2015). Niemniej jednak (stosunkowo) wysokie stopy procentowe doprowadzi y do sytuacji, w której wiele osób -w szczególno ci rodziny z dzie mi -decydowa y si na tak form oszcz dzania.…”

Bequest Motives and the Demand for Life Insurance in East Germany

“…Based on repeated cross‐sections of the German Income and Expenditure Survey (EVS), Sommer () identifies stronger bequests motives among households with children, whereas Jürges () and Sauter et al . () find no evidence for bequest motives among households with children, using panel data from the German Socio‐Economic Panel (GSOEP).…”

“…In a stylized overlapping generations model, where households can choose between consumption and saving in a bond or life insurance, Sauter et al . () show that higher capital gains taxes would increase the demand for whole life insurance, given its tax‐exempt saving component. Their model abstracts from estate taxes, however which can also be an important determinant of life insurance demand in some countries.…”

An OLG Model for Optimal Investment and Insurance Decisions

“…Empirical studies disagree about the existence of bequest motives in savings decisions (Sauter, ). Some studies believe the existence of bequest motives (Fitzgerald, ; Bernheim, ; Sommer, ; Inkmann and Michaelides, ), while others claim that there is no evidence for bequest motives (Hurd, , ; Jurges, ; Villanueva, ; Alonso‐Carrera, Caballe, and Raurich ; Wang, ; Sauter, Walliser, and Winter, ). Our model assumes no bequest motives.…”