What does the term "policy gain" refer to in life insurance?

The term "policy gain" in life insurance specifically refers to the amount calculated as the proceeds of disposition minus the policy's adjusted cost base. This reflects the increase in value of a life insurance policy over time, particularly when it is surrendered or otherwise disposed of.

Understanding this concept is crucial for policyholders who may consider cashing in their policy or who want to understand any potential tax implications that arise from accessing the cash value. The adjusted cost base is essentially the net amount invested in the policy, which helps in determining the taxable portion of any gain. Therefore, when a policyholder surrenders their policy and receives a cash value, the gain is the difference between this cash value and the adjusted cost base, which might trigger a taxable event if a gain is realized.

The other options refer to aspects of insurance policies but do not accurately define "policy gain." The total cash surrender value of a policy is a component but does not consider the adjusted cost base necessary for determining the gain. Similarly, an amount received from a policy loan and premiums paid into the policy do not reflect the gain but instead represent other financial transactions related to the policy’s management and funding. Thus, option A encapsulates the precise definition of "policy gain" within the context