Posted on: September 26, 2013, by : Melody B

Changes to Tax-Exemption Test for Canadian Life Insurance Policies

Background

In the 2012 federal budget, the government proposed changes to the tax-exempt test for life
insurance products. A policy is exempt if its savings component does not exceed that of a
benchmark policy. The proposed changes would affect the savings components of actual and
benchmark policies, especially permanent life insurance policies.

When do the changes take effect?

We understand the proposed rules apply to policies issued Jan. 1, 2016, and later. They are not
expected to apply to existing policies, or policies currently being marketed and issued, unless
policyowners make specific changes after 2015.

Next steps

The public consultation period runs until Nov. 6, 2013. Depending on the feedback the
Department of Finance receives, there could be changes to the draft legislation.