DEFINITION:
Actuarial tables are statistical charts that insurance companies use to predict life expectancy, mortality rates, and other risks, which help in pricing insurance policies.
WHEN AND WHY IT’S USED:
Actuarial tables are used during the underwriting process to estimate the risk associated with an individual or group. They compile historical data to forecast future outcomes such as life expectancy or the likelihood of a claim. This predictive analysis helps insurers set premiums that accurately reflect the risk profile of the insured.
IMPORTANCE IN COMMUNICATION:
Clear communication about actuarial tables with your advisor helps demystify the process behind pricing your insurance policies. It provides a basis for understanding why certain risk factors lead to higher or lower premiums. This knowledge can empower you to ask informed questions about how your personal data influences your coverage and cost.
Additionally, discussing actuarial tables builds transparency regarding the assumptions insurers make when evaluating risk. It ensures that you and your advisor have realistic expectations about your policy’s performance and the potential future costs. This dialogue is essential for making informed decisions and ensuring that your insurance coverage meets your needs.
EXAMPLES IN COMMUNICATION:
“Can you explain how actuarial tables affect the premiums on my life insurance policy?”
“What factors in my profile have the biggest impact on the calculations shown in these tables?”