Legal Definitions - mortality table

A mortality table is a statistical tool that provides data on the probability of death for individuals within a specific population at various ages. It typically presents information in a tabular format, showing the likelihood of a person dying before their next birthday, or the number of people expected to survive to a certain age, based on historical data, demographic trends, and other relevant factors. These tables are fundamental for assessing risk and making financial projections related to life expectancy.

• Example 1: Life Insurance Premium Calculation

  An actuary at a life insurance company uses a mortality table to calculate the appropriate annual premium for a 30-year-old applying for a 20-year term life insurance policy. The mortality table provides the statistical probability that a person aged 30 will die before reaching age 31, and similarly for each subsequent year up to age 50. By understanding these probabilities, the insurance company can accurately assess the risk it undertakes and set a premium that is fair to the policyholder while ensuring the company can cover future claims and remain profitable.

• Example 2: Pension Fund Solvency

  A government agency managing a public employee pension fund regularly consults mortality tables to ensure the fund's long-term solvency. If updated mortality tables indicate that retirees are, on average, living longer than previously projected, the pension fund administrators must adjust their financial models. This might involve increasing contributions from current employees or employers, or re-evaluating investment strategies, to ensure there are sufficient funds to cover benefit payments for a longer period for all current and future retirees.

• Example 3: Calculating Damages in Personal Injury Lawsuits

  In a personal injury lawsuit where a plaintiff has suffered a permanent disability that significantly shortens their life expectancy, a court might use a mortality table to help determine the appropriate amount of damages for future medical care and lost earnings. For instance, if a 45-year-old plaintiff's life expectancy is reduced by 10 years due to an injury caused by negligence, the court would consult a mortality table to establish the plaintiff's original life expectancy and then factor in the reduction. This helps calculate the total cost of future medical treatments and the amount of income the plaintiff would have earned over their original lifespan, which then informs the compensation awarded.