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Purchasing Term Life Insurance to Reach a Bequest Goal: Time-Dependent Case

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Listed:
  • Erhan Bayraktar
  • S. David Promislow
  • Virginia R. Young

Abstract

We consider the problem of how an individual can use term life insurance to maximize the probability of reaching a given bequest goal, an important problem in financial planning. We assume that the individual buys instantaneous term life insurance with a premium payable continuously. We allow the force of mortality to vary with time, which, as we show, greatly complicates the problem.

Suggested Citation

  • Erhan Bayraktar & S. David Promislow & Virginia R. Young, 2015. "Purchasing Term Life Insurance to Reach a Bequest Goal: Time-Dependent Case," North American Actuarial Journal, Taylor & Francis Journals, vol. 19(3), pages 224-236, July.
    • Handle: RePEc:taf:uaajxx:v:19:y:2015:i:3:p:224-236
    DOI: 10.1080/10920277.2015.1033107
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    References listed on IDEAS

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    1. Erhan Bayraktar & Virginia Young, 2013. "Life Insurance Purchasing to Maximize Utility of Household Consumption," North American Actuarial Journal, Taylor & Francis Journals, vol. 17(2), pages 114-135.
    2. Bayraktar, Erhan & Promislow, S. David & Young, Virginia R., 2014. "Purchasing life insurance to reach a bequest goal," Insurance: Mathematics and Economics, Elsevier, vol. 58(C), pages 204-216.
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    Cited by:

    1. Angoshtari, Bahman & Bayraktar, Erhan & Young, Virginia R., 2015. "Minimizing the expected lifetime spent in drawdown under proportional consumption," Finance Research Letters, Elsevier, vol. 15(C), pages 106-114.
    2. Asaf Cohen & Virginia R. Young, 2015. "Minimizing Lifetime Poverty with a Penalty for Bankruptcy," Papers 1509.01694, arXiv.org.
    3. Fangyuan Dong & Nick Halen & Kristen Moore & Qinglai Zeng, 2019. "Efficient Retirement Portfolios: Using Life Insurance to Meet Income and Bequest Goals in Retirement," Risks, MDPI, vol. 7(1), pages 1-11, January.
    4. Landriault, David & Li, Bin & Li, Danping & Li, Dongchen, 2016. "A pair of optimal reinsurance–investment strategies in the two-sided exit framework," Insurance: Mathematics and Economics, Elsevier, vol. 71(C), pages 284-294.

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    1. Erhan Bayraktar & David Promislow & Virginia Young, 2014. "Purchasing Term Life Insurance to Reach a Bequest Goal while Consuming," Papers 1412.2262, arXiv.org, revised Feb 2016.
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    5. Angoshtari, Bahman & Bayraktar, Erhan & Young, Virginia R., 2015. "Minimizing the expected lifetime spent in drawdown under proportional consumption," Finance Research Letters, Elsevier, vol. 15(C), pages 106-114.
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    9. Chen, An & Ferrari, Giorgio & Zhu, Shihao, 2023. "Striking the Balance: Life Insurance Timing and Asset Allocation in Financial Planning," Center for Mathematical Economics Working Papers 684, Center for Mathematical Economics, Bielefeld University.
    10. Fangyuan Dong & Nick Halen & Kristen Moore & Qinglai Zeng, 2019. "Efficient Retirement Portfolios: Using Life Insurance to Meet Income and Bequest Goals in Retirement," Risks, MDPI, vol. 7(1), pages 1-11, January.
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    13. Asaf Cohen & Virginia R. Young, 2015. "Minimizing Lifetime Poverty with a Penalty for Bankruptcy," Papers 1509.01694, arXiv.org.

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