Actuarial Notes

Impact of 2017 Tax Changes on Life Insurance

By Sun Life Assurance Company of Canada · 2015 · ILA201-609-25

Study guide: Exam ILA-201I

A five-page Sun Life article, marked for advisor use only, on how the Income Tax Act's exempt test for life insurance policies changes for policies issued as of January 1, 2017. The exempt test compares the savings component of the actual policy with that of a theoretical benchmark policy, the exempt test policy, to separate exempt, protection-focused policies from investment-accumulation, non-exempt ones. The article is copyright Sun Life Assurance Company of Canada, 2015.

On the syllabus

The Details

The Exempt Test Policy

The Accumulating Fund

The 8% Rule

The 250% Test

Calculating the Net Cost of Pure Insurance

The Adjusted Cost Basis of a Life Insurance Policy

Grandfathering of Life Insurance Policies Issued Prior to January 1, 2017

  • Loss of grandfathering occurs when a policy issued before January 1, 2017 is converted to another type of policy on or after that date, or when coverage that requires medical underwriting is added on or after January 1, 2017.

The Bottom Line

Sources