Trust Accounting For Life Insurance Policy

[mming]

A 401k plan for a 1-man company holds a life insurance policy for the owner/sole participant. We have been showing the value of the policy in the plan's assets as the accumulated amount of premiums that have been paid (all paid by the plan) rather than the policy's actual cash value, as the total premiums have always been less. The owner has now informed us that there will no longer be any premiums due, so it would appear that we would just show it having the same value every year from now on - is this the best way to account for the policy? Thanks for any help offered.

[Belgarath]

The insurance company should produce an annual statement showing the cash surrender value as of the anniversary date. This is what I'd use. Depending upon the policy type and "nonforfeiture option" being used, if any, then the cash value could go up, down, or stay the same on an annual basis.