Valuation Mortality Table

What Does Valuation Mortality Table Mean?

A valuation mortality table is a statistical tool used by insurance companies to calculate cash surrender values and statutory reserves for life insurance policies. Generally, a mortality table shows death rates at specific ages, indicating the number of deaths per 1,000 individuals at each age. It also predicts the likelihood of a person of a given age living for a certain number of years. Insurance companies rely on these tables to assess risk and determine the financial obligations associated with each policy.

Insuranceopedia Explains Valuation Mortality Table

A valuation mortality table often includes a safety margin to protect insurers. This margin helps determine the amount insurers are legally required to set aside for future claims and benefits, known as the legal reserve.

Because these tables directly shape how insurers price their products, the age and health data in them are among the factors that affect life insurance premiums. Younger applicants, for instance, face lower mortality rates in the table and therefore pay less. To see what that looks like in dollar terms, you can compare the average cost of life insurance across different age groups.