How is a "mortality table" used in life insurance?

A mortality table is an essential tool in the field of life insurance, primarily used to estimate the likelihood of death at various ages. This statistical chart provides actuaries and insurance underwriters with data about life expectancy, which is derived from historical mortality rates. By understanding the probability of death for individuals at different ages, insurers can assess risk and determine appropriate premiums for life insurance policies.

This estimation is crucial as it helps insurers predict how many claims they might face in the future, allowing them to set premiums that reflect the likely payout associated with their policyholders' lifespans. Mortality tables also help in designing products that meet the needs of various demographics based on their specific life expectancies.