What is a "mortality table" used for in life insurance?

A mortality table is an essential tool in life insurance that provides statistical data on the likelihood of death at various ages. This data is crucial for actuaries and underwriters when determining the premiums that policyholders should pay for their life insurance coverage. The table outlines the probability of death for a sample population, allowing the insurer to estimate how many policies will result in claims during a specific period.

By using a mortality table, insurance companies can accurately calculate the expected payouts for death claims and set premiums that are proportional to those risks. Additionally, it helps in establishing reserves for future claims, ensuring that the insurer remains financially stable and capable of meeting its obligations to policyholders.

The other options, while related to aspects of life insurance, do not directly pertain to the primary function of a mortality table. For instance, predicting profitability or assessing a policyholder's financial health involves broader factors beyond just mortality rates, and determining investment options is a different area of financial management altogether. Thus, the clear focus of a mortality table is its role in calculating premiums and reserves based on death probabilities.