Abstract
We examine the impact of fatal and nonfatal health shocks on household defaults on financial obligations. We show that fatal shocks significantly increase the likelihood of defaults and provide evidence that housing wealth serves as an important self-insurance mechanism. Surviving spouses experiencing the greatest income losses are more likely to liquidate their homes, and those lacking housing wealth face a heightened risk of debt collection. Notably, these shocks have intergenerational consequences. Nonfatal health shocks cause a smaller rise in default risk and housing wealth is less predictive of defaults. These findings suggest that improving survivors' benefits for those who lack resources could enhance welfare across generations.