Question

Special mortality tables are used for annuities because:

A. people who buy annuities are usually from poorer economic classes and have a higher mortality rate.
B. annuitants are a select group of risks that generally live longer than purchasers of life insurance.
C. higher expenses are associated with issuing annuities than with issuing life insurance policies.
D. life insurance mortality tables are inaccurate at the older ages when most annuities are sold.
E. none of the above.

Answer 1

Special mortality tables for annuities are used because annuitants typically live longer than the general life insurance buying population, requiring distinct actuarial assessments.

Step-by-step explanation:

Special mortality tables are used for annuities because annuitants are a select group of risks that generally live longer than purchasers of life insurance.

Unlike purchasers of life insurance who may reflect a broader cross-section of the population, annuity buyers are often planning for long-term financial stability, which suggests a different set of mortality risks and life expectancy factors.

Therefore, the insurance industry uses distinct actuarial tables for annuities to better account for this difference.