Why Do Insurers Use a Different Mortality Table for Annuity

question 27

Multiple Choice

Why do insurers use a different mortality table for annuity benefit calculations than they use for life insurance premium calculations?

• A) Annuities require more stringent underwriting than life insurance.
• B) The average life expectancy of an annuity applicant is greater than that of a life insurance applicant.
• C) The health status of annuity applicants is generally worse than that of life insurance applicants.
• D) People with a greater-than-average likelihood of premature death are typically the ones who want to purchase annuities.

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Definitions:

Accounts Receivable Period

The amount of time it takes for a company to collect payment from its customers after a sale has been made, indicative of the company's efficiency in collecting its receivables.

Inventory Item

refers to any product or goods that a company holds in stock with the intention of selling it to customers.

Inventory Period

The average time it takes for a company to turn its inventory into sales, indicating how quickly products are sold.

Obsolete Inventory

Items in stock that are out of date or no longer in demand, often leading to reduced value or write-offs.