how an actuarial life table works
insurance companies utilize actuarial life tables to help price products and project future insured events mathematically and statistically based actuarial life tables assist life insurance companies by showing event probabilities such as death sickness and disability an actuarial life table can also include factors to differentiate variable risks such as smoking occupation socio economic status and even gambling and debt load computerized predictive modeling allows actuaries the ability to calculate for a wide variety of circumstances and probable outcomes actuarial scienceactuarial science uses primarily two types of life tables first the period life table is used to determine mortality rates for a specific time period of a certain population the other type of actuarial life table is called the cohort life table also referred to as a generation life table it is used to represent the overall mortality rates of a certain population s entire lifetime actuarial life tables for men and women are computed differently due to the discrepancy of life expectancies for each gender the population selection must be born during the same specific time interval a cohort life table is more commonly used because it attempts to predict any expected change in mortality rates of a population in the future a cohort table also analyzes observable mortality patterns over time both types of actuarial life tables are based on actual populations of the present and educated predictions of a population s near future other types of life tables may be based on historical records these types of life tables often undercount infants and understate infant mortality insurance companies use actuarial life tables to primarily make two types of predictions the probability of surviving any particular year of age and the remaining life expectancy for people of different ages other uses of actuarial life tablesactuarial life tables also play an important role in the sciences of biology and epidemiology in addition the social security administration in the united states uses actuarial life tables to examine the mortality rates of people who have social security in order to inform certain policy decisions or actions 1actuarial life tables are also important in product life cycle management and for pension calculations 