What is my contract's adjusted cost basis, and where do I find it?
It is the contract's tax cost, and it decides how much of anything taken out of the contract is reportable as income. It rises with what you pay in and falls as the pure cost of the coverage is charged against it each year, so it climbs early in the life of a contract and declines later. Only the insurer can state today's figure.
What kind of answer this is
- Claim type: Tax or regulatory position
- Claim type: Requires another professional
- Jurisdiction: Canada wide
The existence and general behaviour of the tax cost is a tax position. Its amount on your contract, and what any transaction would produce, is a calculation for the insurer and a conclusion for a CPA.
How it works
Two forces pull the figure in opposite directions. What you pay in raises it. What the coverage costs the insurer each year lowers it. Early on the first outweighs the second, so the figure grows; later the second outweighs the first, so it falls.
The cost or the catch
The catch is timing. Because the figure moves, the tax result of ending a contract or drawing against it differs from one year to the next, and the difference can be large. Nobody outside the insurer can compute it, and asking in writing before acting is the whole protection.
Where this answer may not apply
- The figure moves every year, so a number quoted last spring does not describe a transaction done this autumn.
- A corporately owned contract adds a second question about the corporation's own accounts, which the insurer's figure does not answer.
- Riders, changes in coverage and any balance outstanding all affect the calculation, and none of them is visible on a statement.
- This page names no rule and no threshold. What is reportable in your circumstances is settled by a tax professional.
What to verify in your own contract
- Today's figure, requested from the insurer in writing and dated.
- The figure the insurer projects at the date of any transaction you are contemplating.
- What the insurer says would be reportable if the contract were ended this year.
- Whether any prior transaction on the contract has already been reported, and in whose hands.
- That your accountant has the insurer's own written figure rather than an estimate.
Continue to the full explanation
Prepare the questions for a CPA, a lawyer and an insurance professional.
Sources
- Insurer tax reporting and policy gain calculations, insurer specific, verified 2026-08-30
- Canada Revenue Agency, published guidance on life insurance policy dispositions, verified 2026-08-30
Accountability and disclosure
- Written by
- José Salloum
- Professional capacity
- Financial security advisor, Canadian Wealth Creation Centre Inc., operating as IBC Financial
- Reviewed by
- Insurance and contract education tier, reviewed under a licensed insurance professional's own authority
- Jurisdiction
- Canada wide
- Last reviewed
- 2026-08-30
- Version
- 1.0
- Compensation disclosure
- Canadian Wealth Creation Centre Inc., operating as IBC Financial, may receive insurer paid compensation if a policy is purchased. It takes the form of first year compensation followed by renewal compensation, and the amount varies by insurer, product, age, premium, contract design, riders and the arrangement with the managing general agency. No single figure would describe every contract honestly, and none is published here.
- Report a correction
- Info@ibcfinancial.com. Write without a policy number, medical information or account details.
Last reviewed 2026-08-30. By Jose Salloum, Financial Security Advisor.