how mortality tables work
section 7520 of the internal revenue code requires the use of a set of actuarial tables for valuing annuities life estates remainders and reversions for most purposes under title 26 of the u s code 3 these tables are available on the irs website the commissioners standard ordinary cso mortality table prepared by the naic in conjunction with the society of actuaries soa is used to calculate life insurance ages across all 50 states and the district of columbia 45mortality tables are used by insurers to determine your actuarial life expectancy this statistic represents an average it could be more or less than how long you as an individual actually live still when spread across millions of people the tables are remarkably accurate in predicting death rates insurers use this information to set insurance premiums and payouts the cso soa tables were last updated in 2017 adding significantly more data that was available to construct the previous 2001 tables the new tables lower mortality rates reflect longer longevity among americans during the new millennium by 2020 all insurance companies were required to transition to the 2017 cso table for all new products sold 6example of valuation mortality tablesay for example a male non smoker wants to buy a 100 000 life insurance policy at age 40 the insurer estimates with mortality tables that this person will live on average to age 81 that means the insurer can expect to receive 41 years of premium payments before the company has to pay the death benefit the insurer sets a premium based on this mortality prediction and the future payout this one person could end up dying tomorrow or living to 100 one individual result doesn t matter that much to an insurer they sell tens of thousands of policies every year so they can count on the large number of policies to track the mortality average on which it based the premiums this is a simple example of how actuaries look at longevity but there s much more to it actuaries have algorithms that take into account many other factors including whether you have high blood pressure or cholesterol your family history and other variables overall the four major factors affecting longevity are your age gender use of tobacco products and current health the longer your expected longevity the less you ll pay for life insurance the insurer predicts you will live longer and pay more total premiums versus someone with a shorter expected mortality 