Modified Endowment Contract - MEC

AAA

DEFINITION of 'Modified Endowment Contract - MEC'

If the cumulative premium payments exceed certain amounts specified under the Internal Revenue Code, the life insurance policy will become a Modified Endowment Contract (MEC). Taxation under a MEC is similar to taxation under an annuity. Under a MEC, the death benefit payable to the beneficiary is not subject to income tax.

INVESTOPEDIA EXPLAINS 'Modified Endowment Contract - MEC'

MEC is usually bought by individuals who are interested in a tax-sheltered, investment-rich policy, who do not intend to make pre-death policy withdrawals.

RELATED TERMS
  1. Group Term Life Insurance

    A type of insurance coverage offered to a group of people. This ...
  2. Life Expectancy

    1. The age until which a person is expected to live. 2. The remaining ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Death Benefit

    The amount on a life insurance policy or pension that is payable ...
  5. Traditional Whole Life Policy

    A type of life insurance contract that provides for insurance ...
  6. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
Related Articles
  1. Home & Auto

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing who will receive your assets and how they will be paid out.
  2. Insurance

    Insurance: Avoiding The Modified Endowment Contract Trap

    Congress has placed limits on the amount of money that can be put into life insurance policies - what can you do to counteract this?
  3. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  4. Professionals

    CFP, CLU Or ChFC - Which Is Best?

    The designation you choose will depend on which areas of financial planning you want as your focus.
  5. Retirement

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  6. Options & Futures

    Benefit Issues When Your Employer Goes Bankrupt

    There are some safeguards in place to ensure that health benefits don't just disappear when a plan is canceled.
  7. Options & Futures

    New Option For Beneficiaries: Reversionary Annuities

    This vehicle can provide survivors with guaranteed income and lower premiums.
  8. Insurance

    Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ratings by Weis.
  9. Insurance

    What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but there are times when it isn't.
  10. Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio?
    Trading Strategies

    How Good An Investment Is Life Insurance?

    Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio? A look at the pros and cons.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center