What is excess premium?
Excess premium is premium paid into a permanent life policy above its target premium. It typically pays commission at a much lower rate — often low single digits — because the carrier treats it closer to a deposit than to insurance premium.
Excess premium is the other half of the target premium mechanic, and it is the reason overfunding a policy is good for the client's cash value and modest for the producer's commission.
Knowing the split matters when comparing products: a policy with a higher target premium can pay materially more on the same client contribution.
| Client contribution | $12,000 |
|---|---|
| At target rate (first $4,000) | $3,600 |
| At excess rate (next $8,000) | $240 |
| Effective blended rate | 32% |
Illustrative only — rates are carrier and product specific.