Question

Overfunded life insurance policies where the proceeds are subject to taxation are called:

Answer 1

Overfunded life insurance policies where the proceeds are subject to taxation are called Modified Endowment Contracts (MECs).

Step-by-step explanation:

Overfunded life insurance policies where the proceeds are subject to taxation are called Modified Endowment Contracts (MECs). MECs are typically funded with large premium payments and have a higher cash value compared to the death benefit. The cash value of a MEC grows tax-deferred but is subject to taxation when withdrawn or used as collateral for a loan.