I am very happy to announce that my single author paper Health Shock Risk, Critical Illness Insurance, and Housing Services has been accepted for publication in Insurance: Mathematics and Economics.
This paper studies a consumption–investment problem involving health shock risk, perishable consumption, and consumption of housing services. I discuss the influence of critical illness insurance on the optimal strategy and analyze the drivers of the optimal critical illness insurance demand. The results indicate that health shock risk has potentially devastating consequences, especially for young agents. It turns out that critical illness insurance is an excellent instrument for hedging health shock risk and for consumption smoothing across different health states. Optimal critical illness insurance demand is decreasing in financial wealth and increasing in human wealth.
