Cash Surrender Value (CSV) or Cash Value: The value available to the policy holder if the policy is surrendered. If no loans are outstanding, this amount is generally available in cash. If loans have been made, the amount available on surrender is equal to the total cash value less the outstanding loan.
Cash Value Accumulation Test (CVAT): The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 provided a statutory definition of life insurance for flexible premium (i.e., Universal Life) products that limited the amount of premium per dollar of death benefit and required at least a minimum amount of pure risk coverage in order to be treated as life insurance for income tax purposes under IRC §101 (i.e., tax-free death benefits). TEFRA was subsequently modified by the Deficit Reduction Act (DEFRA) of 1984 to expand these general set of qualifications to apply to all policy contracts and included mathematical calculations for ongoing testing. IRC §7702(a) provides that, for a contract to qualify as a life insurance contract for Federal income tax purposes, the contract must be a life insurance contract under the applicable law and must either (1) satisfy the cash value accumulation test (CVAT) of §7702(b), or (2) both meet the guideline premium requirements of §7702(c) and fall within the cash value corridor of §7702(d). Generally, the cash value accumulation test requires that a policy’s death benefit must be sufficient so that the account value does not at any time exceed the net single premium required to fund the policy’s future benefits. The net single premium for a policy is calculated using the greater of 4.00% or the guaranteed rate of interest for the general account of the policy, and the 2001 Commissioner’s Standard Ordinary Mortality Table, and will vary according to the age and gender of the insured. The factors for the cash value accumulation test are then equal to 1 divided by the net single premium per dollar of paid up whole life insurance for the applicable age and gender.
Cash-Value-Based "Wrap Fees": Cash-value-based "wrap-fees" are calculated as a percentage of either the policy account value or the policy cash surrender value. While these percentages are generally disclosed in either the policy prospectus, product guide and/or in the footnotes of the illustration, these percentages can and often do vary from year-to-year. In addition, they can and often do also vary with the amount of account value/cash surrender value to which they apply, often times resulting in a "blended" cash-value-based "wrap-fee". As such, cash-value-based "wrap-fees" are dynamic in nature and dependant both on manner and timing in which premiums are (planned to be) paid as well as the asset allocation appropriate to a given client situation and the corresponding expected policy interest/earnings rate.
Cost of Insurance Charges (COI): Charges to cover the insurer’s cost of paying death benefits. Current or expected COI charges are based on current or expected mortality experience, often including a margin for expenses or adverse deviations. These COI charges are analogous to current term insurance premiums for the amount of risk. Contracts also specify guaranteed maximum COI charges.