What does preferred mortality refer to in insurance?

Preferred mortality refers to the expected lower death rates in preferred risk groups. Insurance companies categorize applicants into different risk groups based on various factors such as health status, lifestyle choices (like smoking or drinking), and family medical history. Preferred risk groups typically include individuals who are in better health and exhibit fewer risk factors that could lead to an early death.

By identifying these groups, insurers can offer them more favorable rates and lower premiums because they are statistically less likely to file a claim for a death benefit compared to larger populations. This reflects the underwriting process, where a better health profile leads to lower expected mortality and thus improved pricing for those individuals. This concept is crucial in understanding how life insurance pricing works and the rationale behind the differentiation of premiums based on risk assessments.