Life expectancy refers to the statistical measure of the average time an individual is expected to live, based on the year of their birth, their current age, and other demographic factors. It is a commonly used indicator in actuarial science, the field of insurance and pensions, to estimate the number of years a person is likely to live. This estimation is crucial in the design and pricing of life insurance policies and annuity contracts. Insurers use life expectancy calculations to determine the risk of insuring an individual, the premiums that should be charged, and the expected payout over the course of the policy or contract. Life expectancy is influenced by a variety of factors, including genetics, lifestyle, access to healthcare, and socioeconomic status. In the context of insurance, longer life expectancies typically result in lower annual premiums for life insurance policies, as the insurer anticipates making payments over a more extended period. Conversely, shorter life expectancies may lead to higher premiums or may affect the availability of certain insurance products.
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