Life Insurance FundamentalsQuestion 141 of 315
Why is endowment insurance largely obsolete in today's market?
a.Insurers stopped offering endowments because they were too expensive to administer
b.Endowment policies are illegal under California Insurance Code
c.Modern endowment designs typically fail the federal definition of life insurance and lose favorable tax treatment
d.Endowments cannot be sold to applicants under age 50
Explanation
An endowment is structured to pay the face amount at maturity (for example, age 65) or at earlier death. After tax law changes (IRC §7702 and MEC rules), most endowment designs no longer qualify as life insurance for tax purposes, eliminating the tax-deferred buildup and tax-free death benefit advantages.
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Sen Lin, PrepPass Founder · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)