What's an Actuarial Life Table?
Let me explain what an actuarial life table is. It's essentially a table or spreadsheet that lays out the probability of someone at a specific age dying before they hit their next birthday. You'll see these used a lot by life insurance companies to figure out remaining life expectancy for folks at various ages and life stages, plus the odds of making it through a given year.
Since men and women don't have the same mortality rates, we compute these tables separately for each gender. You might hear them called mortality tables, life tables, or just actuarial tables.
Key Takeaways
The stats in these tables help calculate things like the probability of surviving a certain year of age. Insurance companies rely on them for their operations. They go by names such as mortality table, actuarial table, or life table. And in actuarial science, there are mainly two types of these life tables.
How an Actuarial Life Table Works
Insurance companies turn to actuarial life tables to price their products and forecast future events for insured people. These tables, grounded in math and stats, show probabilities for events like death, illness, or disability.
They can factor in different risks too, such as whether you smoke, your job, your socio-economic status, or even things like gambling habits and debt. With computerized modeling, actuaries can run calculations for all sorts of scenarios and likely outcomes.
Actuarial Science
In actuarial science, you'll find two main types of life tables. The period life table determines mortality rates for a specific time frame in a given population. Then there's the cohort life table, sometimes called a generation life table, which covers the overall mortality rates for a population's whole lifetime.
It's important to note that we compute these tables differently for men and women because life expectancies vary by gender. For cohort tables, the population has to be born in the same time interval. Cohort tables are more common since they try to predict future changes in mortality rates.
These tables also look at mortality patterns over time. Both types draw from current populations and informed predictions about the near future. Other life tables might use historical data, but those often miss counting infants properly and underreport infant mortality.
Primarily, insurance companies use these tables to predict two things: the chance of surviving a specific year and the remaining life expectancy at different ages.
Other Uses of Actuarial Life Tables
Beyond insurance, actuarial life tables matter in biology and epidemiology. In the US, the Social Security Administration uses them to check mortality rates for Social Security recipients and guide policy decisions.
They're also key in managing product life cycles and calculating pensions.
How Are Actuarial Tables Used?
Typically, life insurance companies use them to calculate remaining life expectancy at various ages and stages, and the probability of surviving a particular year.
What's an Actuary Do?
Actuaries describe themselves as risk managers and experts in assessing the likelihood of future events.
What Are the Two Kinds of Actuarial Tables?
The two kinds are the period life table, which determines mortality rates for a specific time period in a defined population, and the cohort life table, used to represent the overall mortality rates of a certain population's entire lifetime.
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