CSO Tables…you won’t find these tables in any furniture store. CSO (Commissioners Standard Ordinary Mortality) Tables are produced by the Society of Actuaries and the American Academy of Actuaries, who work together to glean the data that provides insurance companies the necessary information to determine what reserves they need to keep in order to pay claims and what non-forfeiture[i] values they can provide their policy holders. The CSO tables also provide the basis for how much cash value your life insurance company can guarantee you that your policy will generate.
Of course, life expectancy, which the CSO tables provide, is a critical statistic that all life insurance is based upon. Thousands of life insurance underwriters and actuaries use the CSO tables to help them determine those assumptions as well as the legal requirements of what their products offer the public for purchase.
The most current CSO tables were completed in 2017, prior to that it was 2001. And so today, throughout the life insurance industry, actuaries, underwriters and attorneys are designing new products based upon the new 2017 CSO tables. This allows the insurance companies to offer products that reflect current life expectancy, current risk and of course, updated guaranteed cash values and nonforfeiture benefits that they will be able to offer their policy holders.
The National Association of Insurance Commissioners is the organization that solicits the data contained in the CSO tables, and of course, the IRS is involved in this process as well. It is the IRS that determines when a life insurance policy qualifies as a life insurance policy versus a modified endowment contract for income tax purposes. As of January 2017, the IRS “blessed” the new 2017 CSO tables, keeping the guaranteed cash values in life insurance policies income tax free as long as the IRS guidelines are followed.
What all this means for you is simple. Your existing life insurance policy will not be affected, changed or altered! Your current policy(s) is a contract, and as such, it cannot be altered by anybody but you. For any new policies written after a life insurance company has designed their new products based on the new 2017 CSO tables, it means that death benefits will tend to be higher initially, which means more premium dollars will need to go towards the base insurance, compared to the single premium paid up insurance. This will alter the guaranteed cash values in the beginning years of a policy that was designed based on the new 2017 CSO tables, effectively lowering them across the board in the initial years but allowing for higher cash value build up in the later years.
Dividends will remain unregulated on how they are projected or illustrated, leaving many companies to illustrate higher dividends than what they historically have paid, but that is an age-old problem that has been around for a long, long time. That is why the illustrated dividend is often referred to as the “sales column” by those of us in the industry who realize that dividends are not something to depend upon but are merely speculation until they are actually paid out.
All in all, the new CSO tables reflect that Americans are living longer! That means the insurance companies have to adjust to assume the risk. But the good news is, that Participating Whole Life insurance will continue to be a good solid place to keep your money because it will continue to contractually guarantee to take better care of your money than the average savings account while giving you access to other people’s money to manage and create equity. And that is what the Perpetual Wealth Code™ is all about, keeping more of your money while being able to use other people’s money to create sustainable wealth.
[i] A nonforfeiture clause is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment. Standard life insurance and long-term care insurance may have nonforfeiture clauses.