What is Mortality?
Mortality is a statistical concept that represents the rate of death within a defined population, based on factors such as age, gender, health, and lifestyle. In the context of life insurance, mortality tables—also known as life tables—are used to predict the life expectancy of individuals in a specific demographic. These tables help insurers assess the risk of insuring a person and determine the appropriate premiums to charge based on the probability of death.
Insurance companies rely on mortality rates to ensure that they collect enough premiums to cover the death benefits they are obligated to pay. For example, younger and healthier individuals are likely to have lower mortality rates, leading to lower premiums, while older individuals or those with health concerns might face higher premiums due to increased mortality risk.
The study of mortality is crucial for the financial stability of life insurance companies, allowing them to create accurate risk assessments, set reserves, and maintain solvency. Mortality rates are regularly updated to reflect medical advancements, changes in lifestyle, and emerging trends, ensuring that policies are priced fairly and accurately.