Florida Life and Health Insurance License Practice Test 2025 - Free Insurance Practice Questions and Study Guide

Question: 1 / 400

Which of these statements describe a Modified Endowment Contract (MEC)?

Provides additional tax benefits for early withdrawal.

Restricts the sum that can be borrowed against the policy.

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract.

A Modified Endowment Contract (MEC) is a life insurance policy where the total amount of premiums paid exceeds the limit set by the IRS. This option is incorrect because it provides additional tax benefits for early withdrawal, which is not a defining characteristic of a MEC. Option B is also incorrect because it does not specify that the maximum premium limit is exceeded. Option D is incorrect because a MEC is specifically limited in terms of premium payments, whereas this option suggests unlimited payments. Option C correctly identifies the defining characteristic of a MEC, which is that it exceeds the maximum premium limit set by the IRS.

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Allows unlimited premium payments without affecting policy status.

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