Expectation of life is the average remaining lifetime for a person at a given age, as shown by a mortality table. In insurance, it is an actuarial estimate, not a prediction of how long any one person will live.
Why the term matters in insurance
Life insurers and annuity writers use expectation of life to help evaluate:
- premium adequacy
- reserve assumptions
- settlement values
- the long-term cost of lifetime payment promises
The figure changes with age. Once a person has survived to a given age, the expected remaining lifetime is recalculated from that point rather than from birth.
Expectation of life versus life expectancy
The terms are often used loosely, but they are not always identical in insurance discussion. Expectation of life usually means the average remaining years at a current age. Life expectancy is often used more broadly, including expectancy from birth.
That distinction matters in actuarial work because pricing and reserving depend on survival to a specific attained age, not just broad population averages.
Practical example
When pricing a life annuity for a 70-year-old applicant, the insurer is interested in the expected future payment stream from age 70 onward. The expectation of life helps estimate how long benefits may need to be paid on average, along with interest and other actuarial assumptions.