Richard CanfieldPodcast Host and IBC Advisor, Ascendant Financial · Authorized Infinite Banking Practitioner | Author of 4 Books

Overfilling Policies? Avoid This Trap

8 Feb 2025 · 1 min

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Richard Canfield explains why removing term life insurance can trigger taxes. When a policy is overfilled with contributions, dropping the term coverage shrinks your tax-exempt room and turns part of your money taxable.

Chapters

These are common reasons why you might move that term insurance off. Renewal time frame is the most common. And the second common option is when you want to convert it to create another policy. I just chop like a saw and I cut this jug in half. All of that fluid in the top half is going to spill out. It's got to go somewhere. There's no more room in the container. Well, imagine if that was tax exempt room and you'd overfilled the container and now you're chopping it off because you got rid of the term insurance and so the total exempt room goes down. That means there's not enough exempt room to hold what's in there that can create a taxable event.