Mortality Table

A mortality table, also known as a life table or actuarial table, is a statistical tool used by actuaries, demographers, and public health researchers to provide a snapshot of the expected life spans within a given population. These tables are essential for determining the probabilities of death and survival at different ages and are used extensively in insurance and pension planning to calculate premiums and benefits.

Definition of Mortality Table

A mortality table lists the death rate and life expectancy for each age group in a specific population at a particular time. It shows the likelihood that a person of a particular age will die before reaching their next birthday.

How Mortality Tables are Created

Mortality tables are created using historical data on births, deaths, and population demographics. Actuaries analyze this data to estimate the rates of mortality at various ages. Several factors are considered in this estimation, including gender, socioeconomic status, and health conditions.

Example of Mortality Table Application

Consider an insurance company that needs to calculate the premium for a life insurance policy. The company would refer to a mortality table to determine the likelihood of the policyholder’s death within the term of the policy. Based on these probabilities, the company sets a premium that is commensurate with the risk.

Importance of Mortality Tables

Mortality tables are crucial for financial planning and risk assessment in the insurance and pension industries. They enable insurers and pension funds to assess the longevity risk associated with their products and ensure financial stability and profitability.