SFB 504 discussion paper 99-28

Jan Walliser
International Monetary Fund
Washington, D.C.

Joachim Winter
Mannheim Research Institute for the Economics of Aging (MEA)
University of Mannheim, D-68131 Mannheim, Germany

Tax incentives, bequest motives and the demand for life insurance: evidence from Germany

Life insurance, in particular whole life insurance, plays an important role for private saving in Germany. Whole life insurance combines the insurance against uncertain death with a savings plan. Accordingly, a stylized model of life-cycle behavior would predict that whole life insurance purchases respond to both bequest motives and the tax advantages of life insurance compared with other forms of saving. Using data from the German Consumer Expenditure Survey (EVS), the paper shows that tax advantages and bequest motives indeed have an important impact on life insurance demand in Germany, if the empirical specification explicitly recognizes the censoring of life insurance face values.
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