How is "life expectancy" defined in insurance terms?

In insurance terms, "life expectancy" is defined as the average number of years a person is expected to live based on statistical averages. This concept is fundamental in the life insurance industry because it helps insurers assess risk, determine premium rates, and calculate potential payouts. Life expectancy calculations take into account various factors such as age, gender, health status, and lifestyle choices.

Understanding life expectancy allows insurers to create more accurate models for underwriting and pricing policies, ensuring that they can appropriately manage their risk while providing coverage. This measure is also used in various types of insurance products, including life, health, and annuity policies, and serves as a critical metric for both insurers and policyholders.

The other options do not accurately represent the definition of life expectancy within the context of insurance. Those definitions either pertain to the duration of a policy or relate to specific aspects that do not encompass the broader statistical concept essential for underwriting and risk assessment in life insurance.