Valuation Mortality Table
Candlefocus EditorThis particular type of mortality table incorporates the concept of a cushion, which acts as a safeguard that can help to protect the insurer from going bankrupt in the event of a claim being made. The cushion works by providing a minimum amount of money to be held in reserve. This is to prevent financial losses in cases where the policyholder’s end-of-life expenses exceed the cash surrender value of their policy.
Valuation Mortality Tables serve a range of other important roles. For example, they provide the foundation for actuaries to set accurate age and family history-based premiums for different policies. This enables them to assess both the present and future probabilities of claimants making a claim, and subsequently guides them on the levels of life insurance needed to cover their premium calculations, while protecting themselves from going bankrupt.
Valuation Mortality Tables are not created in isolation. An algorithm is needed to calculate the actuarial age based on multiple, complex factors. This includes assessing the age, family history, medical history and lifestyle of the prospective policy holder and information taken from previous mortality tables. This data is then integrated with other statistical analysis to create the resulting mortality table.
In conclusion, Valuation Mortality Tables are invaluable tools used by insurance providers, helping them to accurately assess the level of risk associated with a policy and calculate financial reserves to cover premiums and any claims. The addition of a cushion to the data provides a necessary level of protection to the provider, ensuring that in the event of a large claim being made, the business is not liable for any hefty losses.