$36,000
$25,260

On Longevity Insurance

It is worth watching the prevalence of longevity insurance offerings, as this is a measure of the degree to which the actuarial community and insurance industry believes that increases in human life span will happen in the near future, but that they will not be large. For the insurer, longevity insurance is a bet on earlier than anticipated death: "Most people buy life insurance to protect against the risks of dying too soon. Now, there are new products offering the same protection if you live too long. It's known as longevity insurance, and there's clearly a huge market for it: Life expectancies are on the rise, cushy pensions are on the decline, and most people don't have enough savings to carry them through two decades or more of retirement. This is not lost on insurance companies, which would like you to think about the product as a pension of sorts - albeit one that you have to buy with your own money. ... But what happens if Merck invents the magic pill and we all live until 105? ... Continued improvements in medicine that allow people to live longer could create losses on our individual annuity business. but these would be more than offset by higher gains on the life insurance. ... Still [if] something like that were to happen, 'at some point, capacity might be limited.'" Companies that bet against large increases in longevity are likely to suffer greatly in decades to come - which is unfortunate for the rest of us, because these concerns are large enough to run to the nearest government for a bailout, and thus we all end up paying for collective bad bets.

Link: http://bucks.blogs.nytimes.com/2011/06/28/longevity-insurance-buying-down-the-risks-of-living-too-long/

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