Life Insurance Compliance Test

Under IRS code section 7702 Definition of Life Insurance, the contract must pass either the Guideline Premium Test (GPT) or Cash Value Accumulation Test (CVAT) to be considered Life Insurance. Both test defines the relationship between cash value and death benefit that is required at all times for the contract to qualify as Life Insurance.

• Guideline Premium Test – The GPT test defines limits on premiums paid based on the death benefit. For a given death benefit, GPT defines a guideline single premium, guideline level premium and 7-pay test. Payment of premiums in excess of these amounts is not permitted.
• Cash Value Accumulation Test – CVAT places a limit on the cash value relative to the death benefit as the account value is allowed to be higher percentage of the face amount as the policy gets older.

In most situations, GPT is the best choice but if you're still unsure please contact the Life Sales Desk to discuss your particular case.