The Internal Revenue Service recently announced that life insurance providers are free to introduce new standard mortality tables that allow coverage of customers who live past the age of 100.
The relevant instruction is IRS Revenue Procedure 2018-20, a nomenclatural scrap that may stick in the brains of insurers, who should welcome the tax authority’s declaration.
People are living a long time these days, and while even 100 may seem a hard peak to conquer, beating the century mark is now more achievable than ever. Insurers will likely welcome any developments that make it easier for them to extend the coverage of ultra-senior clients.
The IRS has a stake in the matter: they don’t want people using their life insurance tax break forever, and mortality table limits are a way for the taxman to restrict the benefit. Until 2001, the age limit for life insurance was set at 100 – not exactly stingy, but in any case, if you lived to 100, even if the reaper tarried, you were terminated by the insurer.
The insurance industry introduced new mortality tables in 2001, which extended life coverage to age 121. The IRS sanctioned the change in its Revenue Procedure 2010-28. In 2018, the industry brought in new mortality tables, which again allowed coverage to age 121.
In its latest ruling, the IRS accepted the new table, extending the 2010-28 sanction, the so-called “safe harbor”, to the latest tables. In a crucial statement, the IRS said its endorsement would apply to any new standard tables that allowed insurance coverage to customers over the age of 100.
For more information, please read:
IRS Blesses 2017 Mortality Tables | ThinkAdvisor