Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether or not a withdrawal from the cash surrender value of a life insurance policy is a "policy loan" where the terms and conditions of the policy do not refer to the withdrawal as a "policy loan".
Position: Even though the life insurance policy does not refer to the withdrawal as a "policy loan", in and of itself, does not mean that the withdrawal would not be a "policy loan".
Reasons: It is a question of fact. The broad wording of the definition of a "policy loan" in subsection 148(9).
CALU - Conference for Advanced Life Underwriting (2001)
May 8, 2001
Question 7
Policy Loans
Pursuant to the terms and conditions of a universal life insurance policy, the policyholder may withdraw monies from the cash surrender value of the policy. The amount of the death benefit otherwise payable under the policy and the cash surrender value of the policy are both reduced by the amount withdrawn. The withdrawal is not referred to as a policy loan in the policy.
Are such withdrawals "policy loans" as that term is defined in subsection 148(9)?
Agency's Response
Even though a withdrawal is not referred to as a "policy loan" in the terms and conditions of the policy it does not mean, in and of itself, that the withdrawal would not be a "policy loan" as that term is defined in subsection 148(9).
The definition of a "policy loan" is very broad and refers to "an amount advanced by an insurer to a policyholder in accordance with the terms and conditions of the life insurance policy". We would therefore need to look at the policy and consider its terms and conditions before we could draw any conclusions. Thus whether or not a particular withdrawal is a policy loan remains a question of fact.
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