### Question
How is the term qualified substandard risk defined?


### Answer
The term **qualified substandard risk** is defined in *26 U.S.C. § 807* as the following:

> any substandard risk if—



(i) the insurance company maintains a separate reserve for such risk,



(ii) there is a separately identified premium or charge for such risk,



(iii) the amount of the net surrender value under the contract is not increased or decreased by reason of such risk, and



(iv) the net surrender value under the contract is not regularly used to pay premium charges for such risk

#### Citation:
  - *26 U.S.C. § 807*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter L-Insurance Companies > PART I-LIFE INSURANCE COMPANIES > Subpart C-Life Insurance Deductions**

