This paper investigates how loss-aversion affects individuals' decisions on savings and insurance purchase. Specifically, this paper empirically tests if prospect theory's loss aversion decreases insurance demand and increases savings demand. Prospect theory predicts that boundedly rational...

Life Insurance Retirement Plans (LIRPs) offer tax-deferred cash value accumulation, tax-free withdrawals (if properly structured), and a tax-free death benefit to beneficiaries. Thus, LIRPs share many of the tax advantages of other retirement savings vehicles but with less restrictive...

This paper hypothesizes that loss aversion may decrease insurance demand and increase savings demand based on the prospect theory. Using individual-level data from the Health and Retirement Study, this paper presents empirical evidence consistent with the hypothesis. Loss averse individuals have...

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