Life Expectancy Tables
Updated on October 4, 2023
Life Expectancy Tables, also known as mortality tables or actuarial tables, are statistical tools used in the insurance industry to estimate the average lifespan of individuals within specific age groups or populations. These tables serve as essential references for insurance companies, actuaries, and underwriters when determining the pricing and risk assessment for life insurance policies, annuities, and other insurance products that involve mortality risk.
What are the key components of life expectancy tables?
Life expectancy tables employ age groups, precise survival probabilities, and mortality rates to provide accurate insights into an individual’s expected lifespan. Age groups help categorize individuals for specific calculations, while survival probabilities estimate the likelihood of reaching a particular age. Mortality rates within age groups are used to formulate life expectancies. These elements collectively contribute to informed decisions in insurance, retirement planning, and public policy.
What are the uses of life expectancy table?
Pricing Insurance Policies – Life insurers use life expectancy tables to determine the premium rates for life insurance policies. They assess the risk associated with insuring an individual based on their age, gender, health, and other factors.
Risk Assessment – Actuaries and underwriters rely on these tables to assess the mortality risk associated with various insurance products. This assessment helps insurers set appropriate reserves and make informed business decisions.
Annuity Calculations – Life expectancy tables are instrumental in calculating annuity payments. Annuities provide regular income to policyholders, and the duration of these payments depends on life expectancies.
Policy Valuation – Life insurers use these tables to value their existing policies and assess their financial obligations for future claims and benefits.