What are mortality tables used for in insurance?

Mortality tables are essential tools in the insurance industry as they help assess the average life expectancy and the likelihood of death among defined groups of people. These tables compile data on the number of deaths occurring within specific age ranges and demographics, allowing actuaries and insurers to analyze mortality rates over time. This vital information ensures that insurance companies can appropriately price their products, predict claims, and manage their risk.

Understanding life expectancy is critical in life insurance, where the insurer must anticipate how long they might need to pay out benefits. By utilizing mortality tables, insurers can better forecast future liabilities and make informed decisions about product design, rates, and coverage options. This detailed understanding informs various aspects of an insurer’s operations, particularly in terms of life insurance underwriting and premium calculation.

The other options do not align with the primary purpose of mortality tables. They are focused on unrelated aspects such as evaluating financial health, assessing natural disaster risks, or determining premiums without directly relating to mortality data.