What Is An Overfunded Life Insurance Policy?
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63333 POINTSview profilePeggy MaceMost of the U.S.An overfunded life insurance policy is a Whole or Universal Life insurance policy (or variation of those, such as Indexed Universal Life) in which more premium is paid in than required to secure the death benefit. An overfunded policy will generate cash value faster, and can possibly increase the death benefit or dividends. People often use overfunded life insurance for tax favored income during retirement. There is the chance that you can overfund it too much and turn your policy into a Modified Endowment Contract (MEC), which takes away the favorable tax treatment of life insurance. If you are going to overfund your policy, work with an experienced life insurance agent who can help you set up the policy to your maximum benefit.Answered on October 8, 2013flag this answer
29 POINTSview profileThomas McGillLicensed Benefit Advisor, GoHealth,Understand how they work can be quite confusing. It's in your best interest to overfund but not to create a MEC. Inside the policy, there is a mortality table. Each year you get older, the cost of insurance increases. If it is not funded properly or the investment doesn't perform well. There is a chance the policy can self destruct. Term is the way to go in some cases. Just based upon your need if it's right for you.Answered on May 6, 2015flag this answer
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