As the end of the year approaches, some of you have been asking us about the new tax laws coming into effect in 2017 and what the implications could be for your current life insurance policies. 

In general, all life insurance policies issued before January 1, 2017 will be “grandfathered” and will continue to follow the current exempt test and policyholder taxation rules. There are, however, certain triggers that could remove the grandfathering status of an in force policy. For example, if additional insurance coverage is added to the policy, with medical underwriting that occurs after 2016, the policy will no longer qualify for grandfathering. Also, if term insurance is converted to permanent insurance (such as universal life) after 2016, the grandfathering will cease.

These legislative changes are intended to modernize the tax rules for life insurance. These laws were last revised in 1982. Since then, people have been living longer, interest and inflation rate conditions have changed and a vast array of new insurance products have emerged.

So is there anything you should do? Generally, only if:

* you are thinking of either adding more coverage to your existing policy or
* you are thinking of taking out an entirely new policy (especially a corporately-owned policy) would you need to consider doing so before the end of the year. Otherwise, you are all good.