Q&A: 2001 CSO Mortality TABLE

(and why IT is IMPORTANT to pay attention)

Effective January 1, 2009, all life insurance products sold in the United States will be re-priced using the 2001 CSO Mortality Table. As a result, most , if not all life insurance companies have and are in the process of redesigning their life product portfolio to meet this legal requirement. Some carriers have elected to discontinue some of their products, and some have created new products to fit the new parameters. For more information, you can contact either the carrier, or the New Business team at Wealth Financial Life.

This Q&A is designed* to help answer any basic questions that you may have, so you can prepare your business plans accordingly. Until, happy selling from Wealth Financial Life.

What does CSO mean?

CSO is an acronym for Commissioners Standard Ordinary mortality tables. These tables are created with the help of the Society of Actuaries to gauge mortality expectations for individuals in the United States. These tables represent the legal limit that life insurance companies may charge for the cost of insurance. Ever so often, the table is updated as the overall expectation of insured mortality changes. The most recent table was created in 2001, but others were created in 1980 (which is currently used), 1958, etc.

Why is the updated table needed?

Given the improvement in mortality experience in the United States due to better healthcare, better lifestyles (non-smokers & seat-belt users), and better working conditions, the industry’s mortality tables must be occasionally updated to reflect these improvements. The new CSO table is used to determine the maximum guaranteed cost of insurance that an insurance company may charge the client for “modern” life insurance products. These new tables will be used to determine the minimum reserve liabilities and non-forfeiture benefits in life insurance contracts. The table is also used to test that a sale meets the definition of life insurance under IRC sections 7702 and 7702A.

What does the change in the tables mean to life insurance products?

The results of the change in tables means lower 7702 and 7702A funding limits.

Are all life insurance companies moving to the 2001 CSO Mortality Tables?

State regulations require every life insurance company to use the 2001 CSO Table by January 1, 2009.

What are the transitional rules for New Business?

Every carrier will have their own transitional rules, but the following rules apply to all of the companies:

• All applications for products written on the 1980 CSO must be received in the Home Office in good order by 10/31/08.
• These policies must be placed (in force with money) by 12/31/08.
• The policy date must be no later than 12/28/08.
• In order to receive a policy for a 1980 CSO life product, the policy must be signed on or before December 21,2008, and received in the Service Center on or before December 29,2008 with the appropriate modal premium.
• Applications signed after December 21,2008, or applications received after December 29,2008, or applications NOT received with money by December 29, 2008,will be issued on a policy supported by the 2001 CSO table, assuming one is approved by the state and system supported. An amendment and signed illustration will most probably be required on delivery for these cases.

What happens if the case is not placed by 12/31/08?

1980 CSO products cannot be legally issued and placed after 12/31/08. For those products that have a 2001 CSO replacement product, the client may accept that product instead.

Will backdating to a policy date prior to 12/31/08 be allowed in order to take advantage of the 1980 CSO Table?

No. Once January 1, 2009 arrives, no policies may be written with the 1980 CSO Table. This is a regulatory requirement, so there can be NO exceptions.

Where can I find 2001 CSO versions of life insurance products?

The 2001 CSO versions of the various life insurance products will be available through their respective carriers, some as early as December 8, 2008. Please check with the specific carrier, or contact Wealth Financial Life.

Will there be any gaps in product Availability?

Most, if not all the life insurance companies will have an updated list of both 1980 CSO products and their 2001 CSO counterparts. There will be some gaps, but each carrier have worked to minimize them. These gaps will be due to such factors as: State Availability, New Product Roll-outs.

Who can I contact for more information on the 2001 CSO table for each specific carrier?

The New Business team at WFLife.

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