Key Takeaways
- Life expectancy is an influential element of insurance and retirement planning.
- Your life expectancy is influenced by various factors, including sex, lifestyle choices, current health and family health history. Insurance companies often consider these factors when determining policy premiums.
- Tools such as life expectancy calculators and tables can provide estimates of an individual’s lifespan.
What Is Life Expectancy?
Life expectancy, known as “actuarial age” in the insurance industry, describes the average age of death in a population. More specifically, the number of years an individual can expect to live.
In the United States, the average life expectancy from birth is 79.11 in 2023. This figure represents period life expectancy, which estimates the average number of years a newborn would live if the mortality pattern of that year were to stay consistent.
According to 2023 data from the Congressional Budget Office, life expectancies at birth and at age 65 will increase to 82.3 years and 21.8 years, respectively, by 2053.
How Do Insurance Companies Use Life Expectancy Data?
In the insurance industry, actuaries compile statistical data for analysis. Actuaries are professionals who use modeling software to forecast the probability of specific events and, in life insurance, estimate an individual’s lifespan. They leverage mathematics and financial theory to determine a person’s actuarial age.
Life insurance companies hire actuaries to collaborate with accountants, financial analysts, market research analysts and other specialists to set profitable, competitive life insurance and annuity premiums. This also mitigates the insurance company’s financial risk.
You can also use your life expectancy to make important decisions about your financial portfolio and retirement planning.
One of the most significant risks in retirement is the possibility of outliving your savings. Knowing your actuarial age, in addition to securing death benefits for your beneficiaries, allows you to plan your retirement goals around your time horizon and long-term financial objectives.
Mapping Out Your Retirement: Are You on Track?
Influential Factors on Life Expectancy
Life expectancy estimates, being statistical measures, do not account for factors such as lifestyle choices or an individual’s family health history.
Insurance companies rely on more accurate information. They may require you to undergo a medical exam before approving you for a policy. The insurer will look at specific factors that influence a person’s life expectancy.
- Sex
- Those assigned female at birth generally live longer than men, based on historical data.
- Lifestyle
- Your environment and your choices impact your health and longevity. Habits, including smoking and alcohol use, and obesity may shorten your lifespan.
In the life insurance business, whether an individual proposed for coverage is a smoker or not becomes a significant determining factor when deciding on the premium.
- Current Health
- The state of your health now can affect how long you live.
- Family History
- If your family has a history of heart disease, cancer or diabetes, you may have a higher risk of premature death.
Life Expectancy Factors
Geography, socioeconomic status and access to health care may also influence one’s lifespan. Pending surgeries or missed follow-up doctor appointments may play a role in determining coverage, particularly in the life insurance category.
Common questions that agents often encounter are related to the health ratings assigned during the life insurance application process. Life insurance carriers retrieve health records from doctors and collect health questionnaires from clients to determine the health rating. The better the health rating, the lower the premium. As an agent in the field, I frequently rely on the proprietary actuarial departments of companies when explaining why a health rating is assigned a certain way for the proposed insured.
Eric EstevezLicensed Independent Insurance Broker and Owner of HLC Insurance Broker, LLCEric Estevez is an independently licensed life insurance agent who serves as a financial professional for a multinational corporation. Upon graduating from William Paterson University with a bachelor’s degree in accounting, Eric kickstarted his career as a financial institution auditor. His first day on the job was Sept. 15, 2008…
How Is Life Expectancy Determined?
Life expectancy is determined through statistical analysis of mortality data. Annual world health statistics reports, for example, compile the most recent health statistics for 194 Member States. The 2023 report, issued by the World Health Organization together with UN agencies, summarizes life expectancy trends to monitor health-related Sustainable Development Goals (SDGs). Researchers also compile health statistics from various other sources, including national health and census data.
- Cohort Life Expectancy
- This is the average lifespan of a group of people born in a given year. Researchers track a group of people born in a particular year for several decades, allowing them to calculate the group’s life expectancy by averaging the group’s ages at death.
- Period Life Expectancy
- The other more commonly used metric is period life expectancy, which estimates the average lifespan for a hypothetical group whose mortality rate is tied to a specific time period, typically a year. Period life expectancy does not consider the changes in mortality rates over time.
There are two main types of life expectancy:
Regardless of which metric is used, life expectancy is an average. Even if mortality rates stayed the same, some people in a population will live longer and others shorter than the estimated life expectancy.
I have clients who prefer to use a primary care physician specializing exclusively in senior patients. Individuals attending such practices are known to have a life expectancy that is 5 to 7 years longer than those who don’t see a PCP dedicated to seniors.
Michael JonesOwner of Grand Anchor Insurance SolutionsMichael Jones, owner of Grand Anchor Insurance Solutions, excels not only in Medicare expertise but also in crafting personalized health care solutions. With a keen focus on client needs, he educates and tailors plans to individual lifestyles, drawing from a wealth of experience in employee voluntary benefits as well.
Estimating Life Expectancy: Tools and Methods
Life expectancy calculators and tables are widely used to estimate how long a person will live.
Calculators provide an estimate based on values input by the user. These may include the user’s date of birth and sex, as well as information regarding tobacco and alcohol use, physical activity, height and weight.
The results from online life expectancy calculators are driven by formulas based on historical statistics. Some calculators take less input than others. For example, the Social Security Administration’s longevity calculator doesn’t factor in a person’s current health, lifestyle or family history, even though they are all determinants.
Besides calculators, life expectancy tables provide helpful estimates. These charts — also called mortality tables and actuarial tables — offer an organized visual overview of survival rates based on age and sex.
Period Life Expectancy Table, 2023 (Men)
| Exact Age | Death Probability | Number of Lives | Life Expectancy |
|---|---|---|---|
| 0 | 0.005837 | 100,000 | 74.12 |
| 1 | 0.000410 | 99,416 | 73.55 |
| 2 | 0.000254 | 99,376 | 72.58 |
| 3 | 0.000207 | 99,350 | 71.60 |
| 4 | 0.000167 | 99,330 | 70.62 |
| 5 | 0.000142 | 99,313 | 69.63 |
Period Life Expectancy Table, 2023 (Women)
| Exact Age | Death Probability | Number of Lives | Life Expectancy |
|---|---|---|---|
| 0 | 0.004907 | 100,000 | 79.78 |
| 1 | 0.000316 | 99,509 | 79.17 |
| 2 | 0.000196 | 99,478 | 78.19 |
| 3 | 0.000160 | 99,458 | 77.21 |
| 4 | 0.000129 | 99,442 | 76.22 |
| 5 | 0.000109 | 99,430 | 75.23 |
Regardless of which calculator or table you use, your result is only an estimate. No tool, no matter how sophisticated, can predict mortality with 100% accuracy.
