Question 1031 of 287 · Texas Life, Accident and Health Agent Exam
A modified endowment contract (MEC) is a policy that
Exactly one answer is correct.
You got of questions right. Here on the question pages nobody remembers which ones you got wrong. The trainer saves your progress and asks the mistakes again until they stick.
Or free: the 10 questions most people get wrong
Show solution
Correct answer to question 1031
- A: fails the seven-pay test, so distributions are taxed gain first
Explanation
MEC death benefits are still generally income tax free, but loans and withdrawals are taxed on a gain-first basis and may carry a 10 percent penalty before age 59 and a half. This is the key difference from a non-MEC policy.
More questions: Life: Types of Policies
- 1032A life insurance policy that endows at age 100 means
- 1033Which of these is a characteristic of term insurance compared with whole life?
- 1034Which type of policy has a death benefit that is level and a premium that is guaranteed to stay the same for a stated number of years, after which it may increase sharply?
- 1035A policyowner wants permanent protection with the lowest possible premium that is guaranteed never to change. Which policy fits best?
- 1036Which feature of an indexed annuity or indexed life policy limits the amount of index gain that can be credited in a period?
- 1037An annuity in which the owner pays premiums as a series of payments over time before income begins is a