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. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
  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. 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.
  3. 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.
  4. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  5. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  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. Financial Advisor

    How to Compare Permanent Life Insurance Policies

    How you can use the internal rate of return to compare and purchase a permanent life insurance policy.
  8. Retirement

    How Survivorship Life Insurance Works

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

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  10. 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. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  6. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
Trading Center