While it may not have been the major headline, the most recent COVID-19 relief bill (Consolidated Appropriations Act, 2021) signed into law on December 27 included a change to the tax code. This new legislation lowers the interest rate that is used to calculate the life insurance premium limits that determine whether a given policy meets the IRS’s Section 7702 definition of life insurance. This change will impact premium limits calculated by both the Guideline Premium Test and the Cash Value Accumulation Test (CVAT). This change will not directly affect universal life insurance illustrated rates or crediting rates.
While life insurance companies are still working to assess the full impact to their product portfolios, this change should generally allow increased premiums relative to the death benefit on universal life insurance policies sold after January 1, 2021. With these changes in mind, please know that carriers industry wide are working to update their illustration and administrative systems to implement the new limits as soon as possible.
Please look for continued communications as the details and timing of the changes become available. For more information on life insurance quotes, contact JenniferLangFinancialServices.com