Older Americans and Life Insurance

The conventional academic literature suggests that demand for term life insurance should decline post-retirement as income protection becomes less necessary. Yet our study reveals that 30-40\% of individuals aged 65 and older maintain at least one term life policy, some even till their 80s. While employment status influences term life insurance holdings—both through income protection needs and employer-provided benefits—we find that a notable number of term life policyholders aged 65 and older hold policies despite having no life-contingent income sources, such as working income or retirement funds, to protect. This study investigates alternative rationales for holding term life insurance beyond income protection, including caregiving value, bequest motives, funeral expenses, and more. Additionally, we find that once individuals purchase term life insurance, it often becomes optimal for them to continue holding it after a short period, with this effect varying significantly by issue age. While these findings provide initial insights into older age term life insurance holdings, further analysis is needed to fully understand the relative importance of these various motivations, which we explore in this paper.