Policy Design
Death Benefit Versus Funding Capacity
6 min read
A permanent policy carries charges that scale with the amount of death benefit. Funding capacity determines how much premium can sustainably support that death benefit.
When the objective is accumulation, a lower death benefit relative to premium may reduce the drag of insurance charges, subject to the tax definition limits that apply to life insurance.
When the objective is protection, the death benefit leads and funding follows. Neither approach is universally correct; the correct answer depends on what the capital must accomplish.
This article is educational and general in nature. It is not legal, tax, accounting, or investment advice, and it is not a recommendation of any product or strategy. Policy features, riders, and availability vary by carrier and state, and coverage is subject to underwriting and carrier approval. Non-guaranteed values depend on credited interest, policy charges, funding, withdrawals, loans, and other policy activity.