Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
An insurer pricing a lifetime annuity must rely primarily on which statistical tool?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Annuity pricing is driven by mortality expectations: the longer annuitants are expected to live, the more payments the insurer must make, so each periodic payment is smaller for a given premium. The mortality table allows the insurer to project how long the income stream must run, just as life insurance uses mortality tables to project when death benefits will be paid. Morbidity tables, by contrast, predict illness and disability.
Why the other options are wrong
- B) Morbidity tables measure sickness and accident frequency and are used for disability and health pricing, not for lifetime annuity income.
- C) Property loss experience applies to property/casualty lines, which have nothing to do with annuity income guarantees.
- D) Equity market returns do not predict longevity; a variable annuity's payout depends on investment performance, but longevity is priced with mortality data.
Memory hook
Annuity pricing runs on life expectancy — the mortality table is the engine room of the income promise.