Overfunded Life Insurance: Designing Policies for Efficiency

Some life insurance policies are designed not only for protection but also for efficient cash value accumulation.

This is sometimes referred to as overfunded life insurance.

The idea is to contribute more money into the policy (within IRS limits) so that the cash value grows more efficiently.

Example

Instead of contributing the minimum premium of $5,000 per year, someone might structure the policy to contribute $15,000 per year.

More of the money goes toward building cash value instead of just covering insurance costs.

The result may be:

• Faster cash value growth

• Greater financial flexibility

• Potential tax advantages

Proper structuring is important to ensure the policy does not trigger MEC rules.

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— Sahil Virani