Ultimate Mortality Table
Candlefocus EditorIn order to accurately price policies, life insurance companies must assess the likelihood of policyholders' death at any given age. To this end, they rely on ultimate mortality tables, which list the percentage of life insurance holders expected to be alive at any given age. These tables are updated periodically when more data become available, and they are considered much more accurate than other mortality tables.
Ultimate mortality tables indicate the mortality rate at each individual age as well as the average mortality rate for a given age cohort (i.e., all individuals a particular age) and for a given policyholder group (i.e., all policyholders who are a certain age). Additionally, these tables compare a given age cohort to total population mortality rates at the time of purchase and for the same age cohorts during the same period of time.
Ultimate mortality tables are created by gathering data from policyholders, collecting information about their age, gender, cause of death, etc.. An insurance company may then use a combination of this data and population viability studies to create an ultimate mortality table.
Ultimate mortality tables provide insurance companies with a way to accurately price life insurance policies, appropriately allocate risk across their policyholders and ensure the financial stability of their policies. Ultimately, these tables enable insurance companies to offer a wide range of life insurance products to the public by accurately pricing them based on the level of risk, and thus ensure that more people can access life insurance policies.