Understanding Mortality Tables
Mortality table is a set of data that has been compiled by an insurance company on the percentage of death among a particular group of individuals. The following are some of the factors that are often used to categorize these people: age, occupation, and sex. Mortality table is also known as a life table or actuarial table. The table shows the probability that an individual within a certain age bracket will die before reaching their next birthday. Mortality tables are set of inferences, but there are two things that can be derived by the insurance company:
Remaining life expectancy for individuals at different age brackets
Probability of survival at a particular age
Separate Life Table for Men and Women
Life tables are generally constructed separately for males and females. Studies show that there is a substantial difference when it comes to the mortality of men and women. Other traits can also be utilized to distinguish various risks, such as socioeconomic class, occupation, drinking and smoking. A mortality table can be customized to include other significant information aside from death. For instance, you can include other health data to calculate an individual’s life expectancy.
Application of Mortality Table in Insurance Contracts
Mortality tables are used in determining the amount of premium that should be provided for any type of insurance products. It is also used to safeguard the solvency of an insurance business through sufficient reserves. An actuary must come up with certain projections of future events such as disability, sickness and death of the insured. To effectively manage this task, certain things have to be developed like the timing and rates of events as well as mathematical models. In order to come up with a more precise table, actuaries have to study past developments and incidence.
In cases where certain expected developments are at hand, these things should also be presented together with the progressive reduction in rates of mortality.
Significant Features of a Mortality Table
The following are some of the most significant features of life tables:
1. Mortality and survival rates are always included
2. Yearly estimation is provided, and if there are significant changes in previous years, this should be highlighted
3. Every mortality table starts from a particular point which is largely dependent on the requirements of the insured individual
4. Generations are observed in order to come up with a more accurate study of an individual’s life and death