Life Insurance Contract Defined

What this document is

Life Insurance Contract Defined - 26 U.S.C. § 7702 is a federal tax code published by U.S. Government (Office of the Law Revision Counsel). It is one of the documents that insurance license exam questions are written from, including life & health practice questions. This page summarizes it and points to the official version, which is the text to rely on.

Sections cited in practice questions

Each practice answer shows the exact passage it comes from. These are sections of this document that questions cite, with a short excerpt from the source text.

• 26 U.S.C. § 7702: Subsection (a) (Guideline Premium and Corridor Alternative)

  “(a) General rule For purposes of this title, the term "life insurance contract" means any contract which is a life insurance contract under the applicable law, but only if such contract - (1) meets the cash value accumulation test of subsection (b), or (2)(A) meets the guideline premium...”

• 26 U.S.C. § 7702: Subsection (a) (Life Insurance Contract Defined)

  “means any contract which is a life insurance contract under the applicable law, but only if such contract - (1) meets the cash value accumulation test of subsection (b), or (2)(A) meets the guideline premium requirements of subsection (c), and (B) falls within the cash value corridor of subsection (d).”

• 26 U.S.C. § 7702(b)(1): cash value accumulation test

  “A contract meets the cash value accumulation test of this subsection if, by the terms of the contract, the cash surrender value of such contract may not at any time exceed the net single premium which would have to be paid at such time to fund future benefits under the contract.”

• 26 U.S.C. § 7702(f)(8) (correction of errors)

  “If the taxpayer establishes to the satisfaction of the Secretary that - (A) the requirements described in subsection (a) for any contract year were not satisfied due to reasonable error, and (B) reasonable steps are being taken to remedy the error, the Secretary may waive the failure to satisfy such requirements.”

• 26 U.S.C. § 7702(g)(2) (amount paid on death of insured)

  “If any contract which is a life insurance contract under the applicable law does not meet the definition of life insurance contract under subsection (a), the excess of the amount paid by the reason of the death of the insured over the net surrender value of the contract shall be deemed to be paid...”

• 26 U.S.C. § 7702(g)(1)(C) (contracts which cease to meet definition)

  “If, during any taxable year of the policyholder, a contract which is a life insurance contract under the applicable law ceases to meet the definition of life insurance contract under subsection (a), the income on the contract for all prior taxable years shall be treated as received or accrued...”

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