Are life insurance holdings related to financial vulnerabilities?

Using the 1995 Survey of Consumer Finances and an elaborate life-cycle model, the quantify the potential financial impact of each individual's death on his or her survivors and measure the degree to which life insurance moderates these consequences. Life insurance is essentially uncorrelated with financial vulnerability at every stage of the life cycle. As a result, the impact of insurance among at-risk households is modest, and substantial uninsured vulnerabilities are widespread, particularly among younger couples. We also identify a systematic gender bias: For any given level of financial vulnerability, couples provide significantly more protection for wives than for husbands.