An overfunded life insurance policy is a type of policy where the premiums paid by the policyholder exceed the amount needed to cover the cost of insurance and other policy expenses. The excess premium payments are invested in a separate account within the policy, which can grow tax-deferred. This excess cash value can be used to pay future premiums, take out loans, or make withdrawals. The main advantage of an overfunded policy is the potential for tax-free growth and access to cash value. However, it's important to note that overfunding a policy may have certain limitations and risks, so it's crucial to consult with a financial advisor or insurance professional before making any decisions.