what is life expectancy 
life expectancy is a statistical estimate of the average number of years a person is expected to live based on actuarial data there are many uses for life expectancy in the financial industry including for life insurance pension planning and u s social security benefits in most countries the calculations for actuarial ages are derived from a national statistical agency based on large amounts of data understanding life expectancylife expectancy is the single most influential factor that insurance companies use to determine life insurance premiums 1 using actuarial tables provided by sources such as the internal revenue service these companies use actuarial age as they try to minimize their liability risk there are several factors that affect your life expectancy also known as your actuarial age the two single most important considerations are when you were born and your gender additional factors that can influence your life expectancy include you can view the federal government s data on u s life expectancy on the national center for health statistics website and in the social security administration s actuarial period life table it s important to note that life expectancy changes over time that s because as you age actuaries use complex formulas that factor out people who are younger than you but have already died as you continue to age past mid life you outlive an increasing number of people who are younger than you so your life expectancy actually increases in other words the older you get past a certain age the older you are likely to get overall human life expectancy has been rapidly increasing during the past two hundred years particularly in developing countries however that rate did decline in the early 2020s during the covid 19 pandemic in 2021 the average life expectancy in the united states was 76 1 years 2life expectancy and life insurancelife expectancy is the primary risk factor in determining whether someone buying life insurance will pass away so their beneficiaries will make a death benefit claim insurance companies consider age lifestyle choices personal and family medical history and several other factors when determining premium rates for individual life insurance policies 1there is a direct correlation between your life expectancy and how much you ll be charged for a life insurance policy the younger you are when you purchase a life insurance policy the longer you are likely to live that means there is a lower risk to the life insurance company because you are less likely to die in the near term which would require a payout of the full benefit of your policy before you have paid much into the policy 3conversely the longer you wait to purchase life insurance the lower your life expectancy which translates into a higher risk for the life insurance company companies compensate for that risk by charging a higher premium the principle of life expectancy suggests that you should purchase a life insurance policy for yourself and your spouse sooner rather than later you will save on premium costs if you buy a permanent policy that builds cash value buying while younger also gives your policy more time to build savings retirement and annuity planninglife expectancy is critical for retirement planning many aging workers arrange their retirement plans asset allocations based on a prediction of how long they expect to live personal rather than statistical life expectancy is a primary factor in creating a retirement plan 