What Is Life Expectancy?

Life expectancy is the statistical estimate of how many years a person is likely to live based on their age, gender, lifestyle and other demographic factors. Life insurance companies assess these factors through medical underwriting and actuarial tables when someone applies for a policy. Life expectancy is a key consideration for insurance companies when configuring insurance premiums and death benefits.

Life expectancy is determined through statistical analysis of mortality data. Insurance companies use actuarial tables to analyze life expectancies and other data to determine insurance premiums and policy terms. Generally speaking, those with a longer life expectancy can expect to pay lower premiums, while those with shorter life expectancies pay higher premiums.

The following is a sample of a life expectancy table from the National Vital Statistics Reports showing estimates of survival rates and predicted lifespans for selected age groups. In this example, life expectancy refers to the average number of years of life remaining for those who have reached a given age (x).

Source: National Vital Statistics Reports (March 2022)

Life expectancy is influenced by several key factors such as age, gender, family history and lifestyle choices, all of which help explain why life insurance premiums may be higher for some people compared to others.

Life expectancy is a critical factor that insurers consider when administering life insurance policies as it allows them to estimate the probability that a policyholder will pass away during the policy term — and, in turn, that the company will need to make a payout. This data-driven assessment influences premium pricing and death benefit eligibility and affects the cost of maintaining a policy.

Premiums and death benefits are highly customized to reflect an individual's estimated life expectancy and risk factors. This approach enables insurance companies to balance the projected risks with the financial coverage provided.

MoneyGeek addresses some important questions to deepen your understanding of how life expectancy impacts life insurance.

Below are resources related to life expectancy in the context of life insurance. These links provide additional insights and data to help you further understand how life expectancy impacts life insurance.

• Average Life Expectancy in the U.S.— A comprehensive overview of average life expectancy in the United States, which provides contextual data that life insurance companies may use to determine policy premiums and terms.

• Mortality Statistics — Mortality statistics are crucial for understanding life expectancy trends and factors. This page delves into the statistics that underpin life insurance rates and actuarial calculations.

• What Is Evidence of Insurability for Life Insurance? — Evidence of insurability is a key concept in life insurance, often involving assessments related to life expectancy. This resource explains the process and its significance regarding life insurance.

• Metros With Longest Life Expectancy — Understanding the geographical variation in life expectancy can be insightful. This page highlights regions with longer life expectancies, which can influence life insurance premiums and policies.