Of course, there are just a couple guidelines to stick to when deciding how much money to put towards each.

  • Your insurance premium must be at least 10% of your total deposit. So however much your insurance premium expense is, you are allowed to put in 10 times that amount as your TOTAL deposit. This is the insurance companies’ limit – first and foremost, it is a life insurance policy and it requires you put in money that gives you a death benefit.
  • The IRS also specifies a limit on how much money you can put into a life insurance policy per year. If you exceed this MEC (Modified Endowment Contract) limit, they will view the policy as a taxable investment and not just life insurance. You do have some flexibility with this limit, as you can actually choose where you want to set it. For more on the MEC Click here.