Ljudski kapital i životno osiguranje
Human capital and life insurance

Summary/Abstract: This paper attempts to explain the role of human capital, as a fundamental price element for life insurance, in the model of optimal asset allocation and insurance demand (Ibbotson et al., 2005). Namely, life insurance demand and optimal asset allocation have consistently been analyzed separately both in theory and practice. However, if we assume that human capital affects both optimal asset allocation and optimal life insurance demand, then we need to analyze these two important financial decisions together. The magnitude of human capital, its volatility, and its correlation with other assets may considerably impact these life-concerning financial decisions. Therefore, a person whose income significantly depends on commission earned from closed sales should regard his human capital as a stock since his income is highly correlated with the market. So, he should purchase less insurance and invest more financial wealth in bonds. However, for example, a tenured professor, who regards his human capital as a bond, should purchase more insurance and invest more financial wealth in stocks.

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