What is Mortality Rate?
A mortality rate measures the number of deaths in a specific population over a specific period of time. Tracking mortality rates allows life insurance providers to better estimate life expectancy, a key metric they use in determining life insurance premiums.
Life insurance and death rates
For life insurance providers to stay profitable — and maintain the policies they’ve already issued — they need a way to ensure they aren’t taking on more risk than they can handle.
This primarily comes down to estimating how long an individual will live before issuing a life insurance policy on them. By only issuing policies to individuals with years left to live — and charging more from people with a shorter life expectancy — life insurance companies work to maximize the number of premiums they’ll be paid.
Mortality rates, or death rates, give insurers an established metric to inform their life expectancy projections. They may look at mortality rates for people in specific jobs, especially high-risk ones like aviation or construction, or people of a specific demographic, like age or gender.
They then plug these mortality rates into mortality tables, actuarial tools that help them determine which rate class to place an insurance applicant in. That determines if they’re willing to take on the risk of insuring that individual and, if so, how much they’ll charge for the requested policy.