The Benefits of Transferring Risk in Classic Life Insurance

Due to the high volatility of yields on financial markets alternative ways to accumulate capital with a higher degree of guarantees attracted increasing attention. In classical life insurance the insurance company underwrites several risks. Besides the income risk for the accumulated capital the insurer will take on longevity risks and on demand also survivor risks. In comparison to other forms of old age provision, classical life insurance therefore allows risk-averse households to increase their utility level. This study summarises the advantage of classical life insurance from transferring risks to the insurer.