DEFINITION of 'Survival Analysis'

A branch of statistics which studies the amount of time that it takes before a particular events, such as death, occurs. However, the same techniques can be used to study the time until any event. While a time-to-event study is theoretically simple to undertake, in practice there are a number of problems if the event being studied is relatively rare or takes a long time to occur. For instance, a study of death rates might be highly difficult to undertake if most subjects outlive the term of the study, or drop out of the study while it is in progress. Results from such analysis are used to help calculate insurance premiums.

BREAKING DOWN 'Survival Analysis'

Within finance, survival analysis has applications to several areas, particularly insurance. For instance, a study of death rates would be directly applicable to the calculation of life insurance premiums. Given a large enough data set, statisticians can develop a hazard function, which outlines the incidence of death at different ages given certain health conditions. From this function, it is simple to compute the probability that the insured will become deceased during the term of the life insurance policy. Factoring in the value of the potential payouts under the policy, an appropriate insurance premium can be calculated for any policy.

RELATED TERMS
  1. Event Study

    An empirical study performed on a security that has experienced ...
  2. Life Insurance

    A protection against the loss of income that would result if ...
  3. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
  4. Decreasing Term Insurance

    A type of annual renewable term life insurance that provides ...
  5. Additional Death Benefit

    An amount that is paid to the beneficiary of a life insurance ...
  6. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
Related Articles
  1. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  2. Financial Advisor

    The Key To CFP Exam Success

    Up to 60 of the questions on this test are case studies. Are you up for the challenge?
  3. Insurance

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  4. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  5. Financial Advisor

    Understanding Life Insurance Premiums

    When buying permanent life insurance, what amount of premium should you pay for the coverage?
  6. Financial Advisor

    Why the Wealthy Should Buy Lots of Life Insurance

    Wealthy clients have an enviable problem — managing, preserving and growing wealth. Properly structured life insurance can help with these goals.
  7. Retirement

    How Survivorship Life Insurance Works

    Should you buy a survivorship life insurance policy?
  8. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
RELATED FAQS
  1. Why is accidental life insurance so inexpensive?

    Accidental life insurance is an inexpensive way of obtaining life insurance coverage for yourself or someone else in your ... Read Answer >>
Hot Definitions
  1. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  2. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  3. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  4. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  5. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  6. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
Trading Center