Legal Definitions - expectancy table

An expectancy table, often referred to as a life table or mortality table, is a statistical tool that predicts the probability of a person of a specific age surviving for an additional period of time. It is a specialized type of actuarial table, which are broader statistical charts used by actuaries (professionals who assess financial risks) to calculate the likelihood of various future events, such as death, illness, or accidents. Expectancy tables specifically focus on human lifespan, using extensive population data to provide an estimated remaining lifespan for individuals at different ages, often considering factors like age, gender, and sometimes other demographic information.

• Example 1: Personal Injury Lawsuit

  Imagine a 35-year-old software engineer who suffers a debilitating injury in a car accident caused by another driver's negligence. The injury prevents them from ever working again. In a lawsuit seeking damages for lost future earnings, an expectancy table would be crucial. The legal team would use the table to estimate how many more years a person of the engineer's age and demographic profile would typically have been expected to work and live. This estimated remaining lifespan helps calculate the total financial compensation needed to cover the income the engineer will lose over their expected working life.

• Example 2: Life Insurance Policy Pricing

  When a 40-year-old individual applies for a new 20-year term life insurance policy, the insurance company needs to determine the appropriate annual premium. The insurer consults an expectancy table, along with other health and lifestyle information, to assess the probability of the applicant surviving for the next 20 years. If the table indicates a higher likelihood of the individual living beyond the policy term, the risk to the insurer is lower, potentially resulting in a more favorable premium. Conversely, if the table, combined with other factors, suggests a shorter life expectancy, the premium might be higher to account for the increased risk of paying out the death benefit sooner.

• Example 3: Pension Plan Funding

  A large corporation manages a defined-benefit pension plan for its employees, promising a specific monthly income upon retirement for the rest of their lives. To ensure the plan has enough money to meet its future obligations, the company's actuaries regularly use expectancy tables. These tables help them estimate how long their retired employees are likely to live and, therefore, how many years they will need to pay out pension benefits. This projection is vital for calculating the total amount of money the company needs to set aside and invest today to cover all future pension payments.