Life · Chapter 4 · Special Products
Modified Endowment Contract (MEC)
Definition
An overfunded life policy that fails the seven-pay test. Distributions taxed gain-first (LIFO) plus a 10% penalty before age 59½. Death benefit still tax-free. Once a MEC, always a MEC.
Exam tip
All single-premium whole life = automatically a MEC.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms