Net Cost of Pure Insurance (NCPI)

In the context of life insurance in Canada, the "Net Cost of Pure Insurance (NCPI)" is a measure used to determine the cost of the pure insurance portion of a life insurance policy. It represents the annual mortality cost associated with providing the death benefit coverage under the policy. NCPI is calculated based on the insured’s age, gender, and the mortality rates prescribed by the Canada Revenue Agency (CRA).

Key aspects of NCPI include:

  • Mortality Cost: Reflects the cost of providing the death benefit coverage.
  • Annual Calculation: Determined on an annual basis.
  • CRA Prescriptions: Uses mortality rates specified by the CRA.

NCPI is important for determining tax implications and the policy's adjusted cost basis for tax purposes.

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