A Funding Corridor is a balance rule in universal life policies that limits how much cash value can accumulate in the policy compared to the death benefit. It prevents the policy from becoming too heavily cash-focused, which could risk it being treated as a Modified Endowment Contract (MEC) with tax consequences.
Maintaining this corridor ensures the policy retains its life insurance status and tax advantages. It’s part of the IRS regulations to separate life insurance from pure investment vehicles.