What policies have an IRS required corridor or gap between the cash value and the death benefit?

The IRS requires a corridor, or gap, between the cash value and the death benefit in certain types of life insurance policies, primarily in modified endowment contracts (MECs) and whole life insurance policies. This corridor ensures that the death benefit remains significantly higher than the cash value to meet the definition of life insurance for tax advantages. The requirement helps prevent policies from being overly funded, which could lead to tax-free distributions that resemble investment accounts rather than traditional life insurance.