Mortality Charges within Current Assumption Whole Life (CAWL) Insurance

Every UL contract explicitly states the maximum mortality rates it will charge for all ages and guarantees that mortality rates will not exceed those maximums. Many companies now use the 2017 Commissioner’s Standard Mortality (CSO) table as the basis for their contractually guaranteed maximum rates, while the prior generation of UL policies were issued under the 2001 CSO table and all policies issued before 2002 used the 1980 CSO mortality table or, possibly, the 1958 CSO mortality table. All of the CSO tables are conservative—that is, they assume mortality rates that are considerably higher than what is actually expected—but the 1980 CSO table and, even more so, the 1958 CSO table are considerably more conservative than the 2001 CSO and 2017 tables. Virtually every company currently charges less than the stated maximums, but those policies issued under the more conservative 1980 or 1958 CSO tables have more room to increase mortality charges in future years if their mortality experience is poor.

Although annual statements explicitly show actual mortality charges, many policy illustrations include mortality charges based on rates the company is assessing currently, but they also may assume that mortality experience will improve in future years. If the mortality improvements do not materialize as anticipated, actual cash values are unlikely to match the projected cash values.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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