What is a Mortality Table?
A mortality table is a tool life insurance companies (and other organizations) use to determine how likely someone of a specific age is to die at their current age. Also called a life table or actuarial table, this chart heavily influences how much life insurance companies charge for policies.
How mortality tables work
Life tables are actuarial tools that give insurance companies a quick way to estimate the statistical probability of an individual dying at a certain age. It basically spells out the probability — which gets calculated by actuaries using actuarial science — that someone at a specific age will die in the next year.
Mortality tables are a lot like a chart laying out life expectancies (based on mortality rates), but they’re more complicated. If you want to see an example, the Social Security Administration maintains an actuarial life table on their website.
You’ll notice that you can call up the table for different years. That’s because mortality tables get updated with the latest data. As medical science has advanced and life expectancies increased, for example, actuaries updated their tables to reflect that uptick in projected years until death.
Why life insurers use actuarial tables
Life insurance companies tailor their mortality tables to evaluate specific risk factors, like whether or not the individual smokes or is overweight.
Let’s take smokers as an example. If the individual applying for life insurance smokes, using a mortality table for smokers gives the life insurance company an idea of how long that applicant might live. It’s not a perfect science, but leveraging the mortality table allows them to make informed decisions about whether or not to offer coverage to the individual and, if so, how much to charge for it.
Generally, the sooner the actuarial table says an individual is expected to pass away, the more likely the insurance company is to decline coverage or charge higher premiums.