Valuation Mortality Table

If you work in the insurance biz, you know how it goes: premiums, claims...the whole shebang is based on statistical data and risk. While this all sounds good and makes sense, it can feel a little morbid when you get down to life insurance, since you’re evaluating probabilities of death.

The valuation mortality table is a statistical table that helps insurance companies figure out all the values that go into life insurance: the premium, the death benefit, and the reserves to have on hand so that, in the aggregate, the insurance company will be able to cover its bills.

The table shows the death rates for each age. (See: Mortality Rates.) It’s usually counted in number of deaths per one thousand people of that same age. Insurance statisticians can use this data to calculate the likelihood of time a person’s life will last. In general, the older you are, the more likely you are to die sooner, so the riskier you are, and therefore, the more you'll have to pay in premiums. Yep, being close to death can be expensive.

On the business side, life insurance policies use the valuation mortality table to make sure they have enough cash on hand for each life insurance policy...enough to cover reserve requirements set by the law.