What are excess premium payments?

Excess premium payments refer to the additional amounts paid by the policyholder that exceed the required premium for a life insurance policy. When a policyholder makes these extra payments, it can lead to an increase in the policy's cash value. This is particularly relevant for permanent life insurance policies, such as whole life or universal life insurance, where the cash value accumulation is a significant feature.

The enhancement of cash value due to excess premium payments can offer various benefits, such as providing a financial resource for the policyholder in emergencies or taking loans against the cash value. It ultimately contributes to the policy's overall financial flexibility and growth, making these excess payments a strategic choice for those looking to maximize their insurance investment.