P.S. 58 Rates Calculations

(Net annual premium per $1,000 - 1 year term)

For various tax purposes, P.S. 58 rates can be used for the net annual premium per $1,000 of one year term life insurance where there is only one insured. P.S. 58 equivalent rates (e.g., joint and joint and survivor rates) can also be determined where there is more than one insured (sometimes referred to as Table 38 rates). The derivation of such rates is described below for one and two insureds.

In each instance, the present value of $1,000 is discounted one year at 2.5% to $975.60. $975.60 is then multiplied by the probability of death of the insured(s) during the year. In each of the formulas below, substitute the appropriate qx from Table 38 for each insured (where two insureds are involved, the second insured is referred to as y rather than x).

required interest rate = i = 2.5%

1 ÷ (1 + i) = 1 ÷ 1.025 = .97560

$1,000 × .97560 = $975.60

qx - probability of dying in each year of age (from Table 38)

(e.g., qx for person age 25 is .00198)

Where two lives are involved qx and qy are used

qx is probability at first person's age

qy is probability at second person's age

(e.g., qx for first person, age 35, is .00329

and qy for second person, age 45, is .00646)

ONE LIFE

P.S. 58 rate = $975.60 × qx

(e.g., rate for person age 50

= $975.60 × .00945 = $9.22)

TWO LIFE (Joint and Survivor, Second to Die)

P.S. 58 equivalent rate = $975.60 × qx × qy

(e.g., rate for persons age 60 and 70

= $975.60 × .02125 × .04926 = $1.02)

after first death use one life rate

TWO LIFE (Joint, First to Die)

P.S. 58 equivalent rate = $975.60 × [(qx + qy) - (qx × qy)]

(e.g., rate for persons age 60 and 70

= $975.60 × [(.02125 + .04926) - (.02125 × .04926)]

= $67.77)