What is the function of a mortality table?

A mortality table serves a crucial function in the life insurance industry by providing statistical data that helps insurers estimate the life expectancy of individuals within a specific demographic. This information is vital for determining the premiums that policyholders will pay for life insurance coverage.

The table presents the likelihood of death at various ages, which allows insurance companies to gauge the risk associated with insuring individuals of different ages and health statuses. By understanding these risks, they can set premiums that are both fair for the policyholders and financially sustainable for the insurer.

In contrast, the other options relate to different aspects of the insurance field. The first option suggests a focus on retirement age, which is unrelated to the primary purpose of mortality tables. The third option mentions investment returns, which is outside the scope of mortality data as it does not address life expectancy or mortality risk. Finally, the fourth option refers to types of insurance policies rather than the statistical analysis of life expectancy or mortality rates provided by the table. Thus, understanding the correct role of a mortality table emphasizes its significance in premium setting and risk assessment in life insurance.