A single-premium whole life policy is most likely to be classified as a Modified Endowment Contract because:

A single-premium whole life policy is most

Multiple choice — select the best answer

AIt fails the 7-pay test by being overfunded early
BIt has no cash value
CIts death benefit decreases
DIt is a term policy

✓ Correct answer: A. It fails the 7-pay test by being overfunded early A single large premium nearly always exceeds the 7-pay limit, causing the contract to be a MEC, which subjects lifetime distributions to LIFO taxation and possible penalties.

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Topic: Life Insurance Basics & Types

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A single-premium whole life policy is most likely to be classified as a Modified Endowment Contract because:

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