Reference: Overkill!, Page 23.

The Overkill rule is not intended to make powerful characters invincible. It is designed to overcome the unrealistic situation where a Champion challenges a powerful character simply because the player knows the Champion has only 1 wound to lose, therefore making it impossible for the superior character to win a combat.

Obviously, it is still better to make a challenge with a Champion rather than allow a powerful character to slay ordinary troopers. In almost all cases, the Champion has more chance of reducing the number of wounds suffered. The rule is intended to discourage players making challenges with weaker characters where they have better characters who might more appropriately make or meet a challenge.

The Overkill rule enables a powerful character riding a huge monster to use its fighting ability to cause a great many wounds in combat. However, it seems wholly inappropriate that characters should take double advantage of this by equipping themselves with magic weapons that cause multiple wounds (see Warhammer Magic). This could enable a character to build up a ridiculous number of overkill wounds, simply because each wound inflicted multiplies up to D3, or even D6. To allow for this, don't multiply up wounds beyond the point the enemy character is dead.

For example, if the enemy has 3 wounds and you inflict 3 wounds then don't multiply up the score at all - 3 wounds are inflicted. If you inflict 2 wounds on the character then multiply up the first wound and if this is sufficient to kill the character then stop; if not, multiply up the second wound as you would expect. The result is to keep the Overkill rule bonus within reasonable bounds.