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Simple English definitions for legal terms
mortality factor
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A quick definition of mortality factor:
Mortality factor: A number used by insurance companies to estimate how many people of a certain age will die each year. This helps them calculate how much to charge for life insurance. It is based on actuarial tables that show the average lifespan of people at different ages. The mortality factor is just one of the things that insurance companies use to determine how much to charge for premiums.
A more thorough explanation:
Definition: Mortality factor is an estimate of the average number of deaths that will occur each year at each specific age, calculated by using an actuarial table. It is used in life-insurance ratemaking to calculate premium rates.
For example, if the mortality factor for a 30-year-old male is 0.05, it means that on average, 5 out of 100 people of that age and gender will die in a year. This factor is one of the elements that a life insurer uses to determine the premium rate for a policy.
The mortality factor is based on statistical data and helps insurers to assess the risk of insuring a person's life. The higher the mortality factor, the higher the risk, and the higher the premium rate.