Cash Value Insurance Contract


The term   “Cash Value Insurance Contract” means an Insurance Contract (other than an indemnity reinsurance contract between two insurance companies) that has a Cash Value.


(3)(vii) Cash value insurance contract [§1.1471-5(b)(3)(vii)]

(vii)(A) In general [§1.1471-5(b)(3)(vii)(A)]

The term cash value insurance contract means an insurance contract (other than an indemnity reinsurance contract between two insurance companies and a term life insurance contract described in paragraph (b)(2)(ii) of this section) that has an aggregate cash value greater than $50,000 at any time during the calendar year, applying the rules set forth in paragraph (b)(4)(iii) of this section. A participating FFI may elect to disregard the $50,000 threshold in the preceding sentence by reporting all contracts with a cash value greater than zero (vii)(B) Cash value [§1.1471-5(b)(3)(vii)(B)]

Except as otherwise provided in paragraph (b)(3)(vii)(C) of this section, the term cash value means any amount (determined without reduction for any charge or policy loan) that-

(1) Is payable under the contract to any person upon surrender, termination, cancellation, or withdrawal; or [§1.1471-5(b)(3)(vii)(B)(1)]

(2) Any person can borrow under or with regard to (for example, by pledging as collateral) the contract. [§1.1471-5(b)(3)(vii)(B)(2)]

(vii)(C) Amounts excluded from cash value [§1.1471-5(b)(3)(vii)(C)]

Cash value does not include an amount payable-

(1) Solely by reason of the death of an individual insured under a life insurance contract; [§1.1471-5(b)(3)(vii)(C)(1)]

(2) As a personal injury or sickness benefit or a benefit providing indemnification of an economic loss incurred upon the occurrence of the event insured against; [§1.1471-5(b)(3)(vii)(C)(2)]

(3) As a refund of a previously paid premium (less cost of insurance charges whether or not actually imposed) under an insurance contract (other than a life insurance or annuity contract) due to cancellation or termination of the contract, decrease in risk exposure during the effective period of the contract, or arising from the correction of a posting or similar error with regard to the premium for the contract; or [§1.1471-5(b)(3)(vii)(C)(3)]

(4) As a policyholder dividend (other than a termination dividend) provided that the dividend relates to an insurance contract under which the only benefits payable are described in paragraph (b)(3)(vii)(C)(2) of this section. [§1.1471-5(b)(3)(vii)(C)(4)]

(5) As a return of an advance premium or premium deposit for an insurance contract for which the premium is payable at least annually if the amount of the advance premium or premium deposit does not exceed the next annual premium that will be payable under the contract. [§1.1471-5(b)(3)(vii)(C)(5)]

(vii)(D) Policyholder dividend [§1.1471-5(b)(3)(vii)(D)]

(1) For purposes of paragraph (b)(3)(vii)(C)(4) of this section and except as otherwise provided in this paragraph, a policyholder dividend means any dividend or similar distribution to policyholders in their capacity as such, including- [§1.1471-5(b)(3)(vii)(D)(1)]

(i) An amount paid or credited (including as an increase in benefits) if the amount is not fixed in the contract but rather depends on the experience of the insurance company or the discretion of management; [§1.1471-5(b)(3)(vii)(D)(1)(i)]

(ii) A reduction in the premium that, but for the reduction, would have been required to be paid; and [§1.1471-5(b)(3)(vii)(D)(1)(ii)]

(iii) An experience rated refund or credit based solely upon the claims experience of the contract or group involved. [§1.1471-5(b)(3)(vii)(D)(1)(iii] (2) A policyholder dividend cannot exceed the premiums previously paid for the contract, less the sum of the cost of insurance and expense charges (whether or not actually imposed) during the contract’s existence and the aggregate amount of any prior dividends paid or credited with regard to the contract. [§1.1471-5(b)(3)(vii)(D)(2)]

(3) A policyholder dividend does not include any amount that is in the nature of interest that is paid or credited to a contract holder to the extent that such amount exceeds the minimum rate of interest required to be credited with respect to contract values under local law. [§1.1471-5(b)(3)(vii)(D)(3)]

UK Guidance: AEIM101660

UK Guidance: AEIM100640

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