when does a life insurance policy become a modified endowment contract
Modified endowment contract In some cases, such as for estate planning, a person may purposely create a modified endowment contract in order to purchase the least insurance and therefore have the lowest insurance costs possible in order to receive the desired benefit. It may be used to pass more money on to heirs. After a life insurance policy is considered a modified endowment contract, it can not be reclassified as a standard life insurance contract again[2].