Basement finishing question

Hi all, I am finishing my basement in a Split Entry style home. I noticed that the overhang from top level over lower level is not well sealed. There is only a vinyl soffit piece blocking air/heat flow. Should I block this area with additional insulation or actually board it up? I assume it was done this way for ventilation, as you would do with an attic, but this is now a living space.
thanks to all replies!
Laura
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My house was done like that and they actually had perforated vinyl soffit vents just above ground level that exposed 3 of my upstairs heat/AC registers and ductwork to the outdoor elements. One was in the cantilevered part of a bedroom and 2 were under bay windows. I have since plugged most the these areas up with pieces of OSB with 'great stuff'' foam insulation + pieces of fiberglass insulation over that. I left the many cavities open to the inside basement so as not to create any dead air spaces. Not sure if what I did was correct, but it did make a big difference in my house.
Kevin
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Laura wrote:

Yep. Make sure that water can never reach the insulation. Board it up if you think it has half of a chance to get wet. Really, blocks of the same material as your floor joists would be best to block that area. That would make the floor / ceiling stronger, key word, bridging. Tom in KY.
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