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A

age100

Junior Member
What is the name of your state? Wisconsin

Hi, could anyone tell me what "Initial 7-pay premium - $5400" means? :confused: Its from an insurance quote I recently recieved. Thank you.
 


S

sturgbe

Junior Member
This is the maximum amount that you can pay before turning the policy into a Modified Endowment Contract (MEC). The IRS like to make certain that the policy keeps with the definition of life insurance, so they set guidlines on how much money you can put into a policy before losing its favorable tax treatment.

Once a policy becomes a MEC, it stays a MEC forever any withdrawals/loans are taxed like an annuity.

Note: MEC's are not always a bad thing, especially when dealing with estate planning.
I hope that helps.
 
A

age100

Junior Member
Hey, thanks for the explanation sturgbe!:)

Helps a lot. This insurance stuff can so confusing.:confused:
 
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