Posts tagged ‘life insurance mortality tables’

Life Insurance: Mortality Tables Explained

Mortality tables are used by various companies, primarily in the life insurance field, but not exclusively, that help to assist insurance companies with risk evaluations. Understanding how life insurance companies evaluate risk and how they determine rates and make underwriting guideless stems from an understanding of mortality tables and how these  little grids help to create a more accurate way of creating probability to avoid higher risks of loss. The tables also help with statistics in understanding mortality patterns.

What are Mortality Tables?

Mortality tables are mathematically computed tables used to assist in evaluating the life expectancy of people based upon age, gender and geographic location. These tables greatly assist in determining the premiums and rates for insurance companies because they help insurance companies evaluate greater potential risks involved in insuring high risk applicants. Insurance companies must use mortality tables for this reason, to help ensure they stay solvent and able to pay claims.

Why are Mortality Tables used?

While mortality charts are by no means a guarantee of death and while age, gender and geographic location are not the only important factors in determining a person’s mortality probability; these tables provide a necessary tool for insurance companies to base their risk and rates on in an effort to make sure they receive enough premiums and investments to cover claims. If insurance companies did not charge enough for insurance, they would not have enough funds to pay out for claims.

How long do Mortality Rates Evaluate?

The mortality grids evaluate the life expectancy for people ages ranging from zero to 100 years old. The mortality rates are computed for each and every year of a person’s life based on age, gender and location. Obviously at 10 month old baby is going to have a lower mortality rate, or a greater life expectancy than a 95 year old person. For example, a 10 month old baby may be expected to live until the age of 78 years, thus expected to live 77 more years while a 95 year old person may only be expected to live for two more years.

Mortality Tables used for Statistics

Statistics are helpful to provide preventive knowledge and not just for evaluating insurance rates. Some of the statistics that mortality charts help the National Center for Health Statistics to keep track of and understand statistical patterns for are general mortality; broken down demographically, by cause of death, and by age; leading causes of death; life expectancy; population; an infant general file and linked birth and infant death file. These statistics help officials know where and how to make life saving changes.

The mortality tables allow a comprehensive approach to determining a person’s life expectancy based on the results of the mortality table. While mortality charts are not an exact science, and certainly do not mean a specific person will parish at a certain time, they provide a more accurate way for insurance companies to determine safety guidelines for assessing rates, investments and underwriting guidelines. In addition, mortality charts help keep track of overall mortality statistics.