Life Insurance FundamentalsQuestion 141 of 716
Why is endowment insurance largely obsolete in today's market?
a.Insurers stopped offering endowment policies because they became too expensive to administer profitably
b.Endowment policies were made illegal under the California Insurance Code and may no longer be sold by any admitted insurer
c.Modern endowment designs typically fail the federal definition of life insurance and lose favorable tax treatment
d.Endowments may no longer be sold to applicants under age 50 because federal suitability rules forbid it
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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PrepPass team · 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)