Tabular Cost of Insurance
Definition - What does Tabular Cost of Insurance mean?
Tabular cost of insurance refers to the cost of premiums the policyholders have to pay the insurance company for it to be able to pay the death benefits for the year. The cost is computed using the probability of death among the insured.
Insuranceopedia explains Tabular Cost of Insurance
Life expectancy is studied seriously by insurance companies, especially those that sell life insurance. They must have an idea about how old their policyholders will likely be when they die. This is based on statistics and scientific studies. That's because they have to be always financially ready to pay the death benefits of their policyholders.
The health information of each insured person is often updated. A new element of his or her lifestyle (such as smoking) might prompt his or her mortality. The insurance company should not be caught unaware should this happen.
Another safeguard is calculating the money they have to collect to pay off death benefits for a year based on the health profiles of their policyholders. If the life expectancy is seventy-three years old in one area and there are a considerable number of policyholders who are of that age, then the insurance company has to determine whether they have the resources to pay for death benefits of these people.