Life insurance funding refers to the strategy for paying premiums on a policy over time, including how much to pay, how often, and from which sources or entities. Funding decisions affect policy performance, cash value accumulation, and long term affordability. In permanent life insurance, funding strategies might involve level premiums to endow the policy at a certain age, short pay designs with high early premiums, or flexible contributions up to guideline or MEC limits for maximum accumulation. Funding can come from individuals, businesses, trusts, or third party financing arrangements. Choosing an appropriate funding pattern is critical to aligning the policy with the client's cash flow, tax, and planning objectives.

In practice, advisors analyze life insurance funding options while reviewing illustrations and designing plans. For a family buying whole life or universal life for legacy and supplemental retirement income, they may recommend overfunding within non MEC limits to build cash value efficiently. For a business funding a buy sell agreement, premiums might be shared among owners or paid by the entity, with funding patterns coordinated with compensation and dividend policies. In ILIT cases, funding often depends on annual exclusion gifts and Crummey powers, requiring careful timing and documentation. Premium financing strategies bring additional complexity, involving loans, collateral, and exit plans. Advisors must stress test funding designs under different return and cost assumptions, ensuring that policies remain sustainable and do not lapse unexpectedly. By mastering life insurance funding strategies, producers can build resilient, tax aware solutions that support long term goals without overstraining client resources.