Actuarial Life Table

To be or not to be...before my next birthday. That is the question an actuarial life table asks.

Specifically, the table is a compendium of percentage probabilities that a person dies before their next birthday. Men map differently from women, races map differently from each other, smokers and creative writers for Shmoop map differently from the rest of the world. The catchier name for this entity is a mortality table, and it's not found at Pottery Barn.

Why do we care? Because insurance companies price our life insurance based on the probability that we will die this year. The math is pretty simple. When the odds are allocated over a very large "n-sample," or number of participants sampled in the table, so that in a group of, say, ten thousand young people, if the odds add up to being that one of them will die before their birthday next year and then receive $100,000 (or rather, their heirs will), then the insurance company somehow has to make at least $10/term life buyer to cover the $100,000 that they'll have to pay out.

In reality, the number the insurance company collects is much higher, because accidents happen. And in a really bad year, a whole lot of people could die, bankrupting the insurance company and leaving all subsequent deaths unpaid for. The actuarial life tables live at the center of these calculations.