Indian Life Insurance with Cash Surrender Value
Many Indians hold life insurance that builds a cash surrender value, such as endowment, whole life and unit-linked (ULIP) policies. These policies are often treated as savings or investments in India. For a US person, they can create FBAR, Form 8938 and PFIC questions, and the answers depend on the policy's structure.
Why the policy structure matters
| Policy type | General features | US reporting questions |
|---|---|---|
| Term insurance | Pays only on death, no cash value | Usually no FBAR or Form 8938 issue, because there is no cash value. Confirm. |
| Endowment or whole life | Builds cash surrender value; pays maturity or surrender value | Often reportable as an FBAR account when cash value exists. Review the policy and value. |
| ULIP (unit-linked) | Cash value follows investment funds chosen by the policyholder | Investment exposure raises PFIC and reporting questions. Review each fund option. |
FBAR
A life insurance or annuity contract with a cash value can be a financial account for FBAR purposes. The cash surrender value is the figure usually used, converted to US dollars using the required method. It counts toward the $10,000 aggregate threshold with your other foreign accounts. Do not assume a policy is outside the FBAR because it is an insurance product.
Form 8938
Foreign life insurance with cash value may be a specified foreign financial asset under FATCA. Whether it must be reported depends on the policy terms and your thresholds. Review each policy rather than relying on a general answer.
PFIC
Insurance policies can receive special treatment under the PFIC rules, including exceptions for certain life insurance contracts. ULIPs that invest in mutual funds can behave like investment products, and the exception may not apply in the same way. This is one of the most fact-specific areas in Indian-US tax reporting.
- Policy number, insurer, type and start date
- Premiums paid by year, in rupees and in US dollars
- Cash surrender value or fund value at the end of each year
- Any loans, surrenders, bonuses or maturity payments
- For ULIPs, the funds chosen and the switches made during the year
General educational information. Insurance reporting and PFIC treatment depend on the policy terms and individual facts. Confirm the rules on fincen.gov and irs.gov, and consult a qualified professional before filing.