The cash value accumulation test is one test that is applied to a life insurance policy to determine if it meets the tax code definition of a life insurance contract with death benefits that are excluded from taxable income. By definition, a policy passes the cash value accumulation test if, according to the contract terms, the total premiums paid for the policy at any time in the policy's first seven years exceed the total net level premiums that would have been paid for the policy if it was a seven-pay life insurance policy total premiums paid for the contract at any given time do not exceed the greater of the guideline single premium for that date or the sum of the guideline level premiums to that date amount of the death benefit payable at any given time equals at least a specified percentage of the cash surrender value amount of the policy's cash surrender value is never greater than the amount of the net single premium needed to fund the policy death benefit

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The passage describes the Cash Value Accumulation Test CVAT used by the Internal Revenue Service IRS to distinguish between life insurance contracts a... View the full answer