What Is an Actuarial Table?

Updated: November 8, 2024

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An actuarial table, also known as an actuarial life table or mortality table, is a statistical tool used by life insurance companies to calculate policyholders' life expectancies. These tables include data points such as age, gender, mortality rate and lifestyle, which are used to calculate life expectancy, inform life insurance risk assessment and help determine premiums and payouts.

Actuarial tables are also utilized across various other sectors, including social security administration, pension plan management, public health initiatives and demographic studies.

KEY TAKEAWAYS ON ACTUARIAL TABLES

Actuarial tables are tools used to determine someone's life expectancy based on factors such as age, gender, mortality rate, and even smoking and socioeconomic status.
Life insurers rely on these tables to price policies and estimate future payouts.
Actuarial tables have applications beyond life insurance, including pension planning, public health policy and social security administration.

How Actuarial Tables Work

Actuarial tables enable life insurers to price products based on the risk that a given policyholder will pass away during the policy's lifetime. These tables calculate project life expectancies using factors like age, gender, mortality rate and occupation, alongside variable risks such as smoking and socioeconomic status.

Actuaries, professionals who build and interpret actuarial tables, apply these data points and predictive modeling to ensure that insurance premiums and payouts are accurately projected. Actuarial tables are tailored to specific populations, such as men and women, since they have different average life expectancies. Life insurance companies may also interpret actuarial tables differently for term life insurance, which covers a set period, versus whole life insurance, which covers the insured's entire lifespan.

Actuarial tables are key to determining premiums across all policies, from variable life insurance, which combines a death benefit with an investment component, to guaranteed acceptance life insurance for those with significant health issues. They also inform annuities and final expense insurance. In return of premium life insurance, actuarial predictions determine the refund of premiums if the policyholder outlives the policy term.

Actuarial tables may additionally be adjusted for subgroups within a population, such as individuals with certain medical conditions or those engaged in high-risk occupations, to ensure that the premiums charged are commensurate with the risks the insurer assumes.

Key Components

The calculations of actuarial tables are based on several key data points that quantify life event probabilities.

Data Point	Description
Age (between x and x+1)	This indicates the one-year age interval referenced in a given table row (for example, between 70 and 71).
Mortality Rate (qx)	The probability that an individual at age (x) will die before reaching age x+1.
Number of Lives (Ix)	The number of individuals out of the initial hypothetical 100,000 that survive to age (x).
Number of Deaths (dx)	The number of individuals out of the initial hypothetical 100,000 who die in each age interval.
Life Expectancy (ex)	The average number of additional years an individual at exact age (x) is expected to live.

Sample Actuarial Table

This is a snippet of a larger actuarial table found in the National Vital Statistics Reports demonstrating how the key components are used to calculate life expectancy, which is used to gauge insurance risks.

Age (between x and x+1)	Mortality Rate (qx)	Number of Lives (lx)	Number of Deaths (dx)	Life Expectancy (ex)
0-1	0.005575	100,000	557	78.8
1-2	0.000379	99,443	38	78.3
....	....	....	....	....
70-71	0.018143	77924	1414	15.9
71-72	0.019683	76511	1506	15.2
72-73	0.021193	75005	1590	14.5
73-74	0.023529	73415	1727	13.8
74-75	0.025583	71688	1834	13.1
75-76	0.028288	69854	1976	12.4
76-77	0.030996	67878	2104	11.8
77-78	0.034485	65774	2268	11.1

Source: National Vital Statistics Reports (March 2022)

Types of Actuarial Tables

The two primary types of actuarial tables are period life tables, which rely on mortality rates from a specific point in time, and cohort life tables, which follow a group's mortality over time, taking into account future changes in mortality rates.

Period Life Table: This type of table calculates the life expectancy of a population based on mortality rates in a given year. It assumes that the mortality rate will stay the same throughout the rest of the group's life; it is commonly used to estimate life expectancy for insurance underwriting and public health analysis.

Cohort Life Table: This type of table tracks a certain group, typically people born in the same year, and observes their mortality rates over time. It accounts for changes in mortality rates throughout the lifespan of the cohort, making it more precise than period life tables but also more subjective as it requires future projections.

Other Applications of Actuarial Tables

Actuarial tables extend beyond insurance and play a pivotal role in various sectors, including pension planning, public health, social security, and personal financial planning, by providing a statistical foundation for decision-making and risk assessment.

Pension Planning

Actuarial tables ensure that pension funds remain solvent to support individuals throughout retirement. They calculate the probability of retirees living to certain ages, allowing for the accurate allocation of resources over their expected lifespan.

Public Health

Actuarial tables inform policy-making and the development of public health interventions by providing statistical insights into life expectancies and the prevalence of various health conditions across populations.

Social Security

These tables project future benefit payouts and assess the Social Security Administration's long-term financial sustainability, accounting for demographic shifts and changes in life expectancy.

FAQ About Actuarial Tables

Explore our answers to frequently asked questions regarding the function and impact of actuarial tables.

How often are life tables updated?

Life tables are typically updated annually to reflect the most current data on mortality rates and life expectancy trends. However, other tables, such as those used by the IRS and the National Vital Statistics System (NVSS), are only updated every ten years.

Why do insurers need separate tables for smokers and nonsmokers?

Insurers use separate tables for smokers and nonsmokers because smoking significantly increases health risks and affects life expectancy, which impacts the calculation of insurance premiums and risk assessments.

Are mortality rates and number of deaths the same?

Mortality rate and number of deaths are different data points. Number of Deaths (dx) is a count of deaths, usually out of 100,000, while Mortality Rate (qx) is a probability derived from (dx).

How do actuarial tables affect life insurance rates?

Actuarial tables impact life insurance rates by assessing the life expectancy of individuals. The lower the mortality risk (or the higher the life expectancy) for an individual or a group, the lower the insurance premiums typically are. Conversely, higher mortality risks lead to higher premiums. By evaluating age, health, and other factors, actuarial tables enable insurers to set premiums that accurately reflect the risk they are undertaking.