What is a “material change” that triggers retesting under the 7-pay test?
The most common type of material change for MEC purposes is an increase in the death benefit under the contract. However, a death benefit increase is not a material change if it is attributable to the payment of “necessary premiums,” defined as any premiums necessary to fund the lowest level of death benefit and qualified additional benefits payable in the first seven contract years. Any increase in, or addition of, a “qualified additional benefit” is also a material change. The “material change” concept, like the 7-pay test itself, is a highly technical, actuarially driven concept that, as a practical matter, is handled by the insurance company through its administrative systems.
