Why do insurers use a different mortality table for annuity benefit calculations than they use for life insurance premium calculations?
A) Annuities require more stringent underwriting than life insurance.
B) The average life expectancy of an annuity applicant is greater than that of a life insurance applicant.
C) The health status of annuity applicants is generally worse than that of life insurance applicants.
D) People with a greater-than-average likelihood of premature death are typically the ones who want to purchase annuities.

Question

Quizplus · Accepted Answer

Insurers use a different mortality table for annuity benefit calculations than they use for life insurance premium calculations because the average life expectancy of an annuity applicant is greater than that of a life insurance applicant. Annuity applicants are typically those who have already reached retirement age or are approaching it, while life insurance applicants are generally younger and healthier. Using a mortality table based on annuity applicants ensures that the insurer can appropriately calculate and manage the risk of longer lifespans and potential payouts.

Why Do Insurers Use a Different Mortality Table for Annuity