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

A mortality table is a statistical tool used in life insurance to estimate life expectancy and assess the risk of death for individuals within a certain demographic. This table provides vital data by showing the likelihood of death at various ages and is essential for actuaries when determining premium rates and benefits for life insurance policies. By analyzing the mortality rates, insurers can predict how many policyholders are likely to pass away in a given timeframe, allowing them to appropriately price their products and ensure they have sufficient funds to cover claims.

The other options do not pertain to the primary function of a mortality table. For instance, calculating investment returns on policies involves different financial metrics rather than mortality rates. Defining the terms of the insurance contract is more about legal language and policy specifics than statistical data. Lastly, while predicting market trends is vital for insurance companies, it falls outside the realm of what a mortality table is designed to accomplish. The primary focus of a mortality table remains firmly on evaluating risks associated with life expectancy.