Define: Basic Mortality Table

A basic mortality table is a statistical tool used by insurance companies and actuaries to estimate the probability of death at different ages. It provides valuable information for calculating life insurance premiums and determining the financial risks associated with insuring individuals.

A basic mortality table is constructed by analyzing large sets of historical data on mortality rates. This data is collected from various sources, such as government records and insurance companies, and is used to calculate the probability of death at different ages.

There are several types of basic mortality tables, including the American Experience Table, the Commissioners Standard Ordinary Table, and the Select and Ultimate Table. Each table is based on different sets of data and is used for different purposes within the insurance industry.

Life insurance companies use basic mortality tables to assess the risk of insuring individuals and to determine the appropriate premiums to charge. These tables help insurers estimate the likelihood of policyholders dying at different ages, which is a crucial factor in calculating the cost of coverage.

Yes, basic mortality tables can be used for various purposes beyond life insurance. They are also utilized in pension planning, annuity calculations, and other financial planning scenarios where estimating life expectancy is important.

While basic mortality tables are not legally required, they are widely used in the insurance industry as a standard practice. Insurance regulators often require companies to use recognized mortality tables to ensure fairness and consistency in premium calculations.

Yes, basic mortality tables can be customized to reflect specific populations or groups. For example, insurers may develop separate tables for men and women, or for different occupational groups, to account for variations in mortality rates.

Basic mortality tables are typically updated periodically to reflect changes in mortality rates over time. The frequency of updates may vary, but it is common for tables to be revised every few years to ensure accuracy and relevance.

No, basic mortality tables are just one of several factors considered when calculating life insurance premiums. Other factors, such as the individual’s age, health, lifestyle, and the desired coverage amount, also play a significant role in determining the final premium.

Basic mortality tables are primarily used by insurance companies and actuaries, and they may not be readily available to the general public. However, some organisations and research institutions may publish aggregated mortality data that can provide insights into life expectancy trends.