Prior research indicates a significant relation between life events and the demand for life insurance. This paper is the first study to relate the demand for life insurance to household portfolio holdings in a dynamic framework. The study examines changes in life insurance demand as a function of changes in household portfolio holdings and life events using panel data during the recent financial crisis. The results indicate that household portfolio holdings are more significant than life events in explaining life insurance ownership decisions, and suggest a complementary rather than a substitution relationship between the ownership of life insurance and the holdings of equity and bonds during recessions. The results also indicate that households with more financial assets allocated to bonds drop significantly more term life insurance coverage. Further implications for practitioners are discussed.
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