Unlock The Potential of Your Life Insurance Policy
Paid-up additional life insurance (PUA) involves purchasing small chunks of whole life insurance using dividends from an existing whole life policy. Each PUA has its own death benefit and cash value and earns dividends, effectively increasing your policy’s worth over time without the need for medical underwriting or higher premium payments.
Key Takeaways
- Boost Your Coverage: Paid-up additional insurance allows you to expand your whole life insurance coverage using policy dividends.
- Self-Sustained Insurance: Each paid-up addition is fully paid for and stands alone.
- Compounding Growth: PUAs can earn dividends and compound in value indefinitely.
- Flexible Financial Options: Surrender PUAs for cash value or take a loan against them as nonforfeiture options.
- Convenient Riders: Many insurance companies offer PUA riders to help you buy additional PUAs.
Discover the Strength of Paid-Up Additional Insurance
Paid-up additions are unique because they don’t require further premium payments once purchased. These small insurance packets might seem insignificant individually but can collectively lead to substantial increases in your policy’s value over time. The ability for PUAs to earn dividends and compound enables significant growth in both death benefits and cash value.
Benefits Beyond Health Conditions
One standout benefit of PUAs is the absence of medical underwriting. This is especially advantageous for those whose health has declined since their initial policy issuance. Increasing your life insurance coverage through PUAs bypasses medical assessments and can be a lifeline if typical coverage extensions are denied.
Purchasing PUAs necessitates membership in a participating whole life policy, one that pays dividends. These dividends offer various uses such as reducing your premium, adding to your cash value, or earning interest.
PUA Riders: Supercharge Your Coverage
Many insurers provide Paid-Up Additions riders, enabling policyholders to purchase more PUAs directly with extra premium payments. This accelerates the growth of both your cash value and death benefit due to compounding dividends. Structuring this rider into your original policy is often required, but select companies allow later additions, subject to health or age-related constraints.
Example of Paid-Up Additional Insurance
A Real-World Application
Consider a 45-year-old male who acquires a whole life policy with an initial annual premium of $2,000, providing a $100,000 death benefit. In the policy’s first year, he opts to pay an additional $3,000 for a PUA rider. This results in immediate cash value growth and adds $15,000 to his death benefit. Continuous PUA purchases will compound these benefits over time, significantly enhancing his financial security.
Special Considerations
Dividends: A Potential Windfall
Dividends are typically issued yearly by mutual insurance companies during profitable periods. While not guaranteed, longstanding companies often maintain consistent dividend records, making them reliable for boosting your PUAs. Dividends offer flexible uses beyond insurance purchase—they can be redirected to lower premiums, pay loans or earn interest.
Clarifying Reduced Paid-Up Insurance
Reduced Paid-Up Insurance allows for converting a lapsed policy’s cash value into a smaller, fully-paid policy. This option ensures you retain some life insurance coverage though at a reduced death benefit. This contrasts with PUAs which represent additional paid-up life coverages throughout the life of your policy.
Expand your financial protection with Paid-Up Additional Insurance, ensuring that your life insurance grows both in value and benefit over time, free from the need for extensive underwriting.
References
- ParadigmLife.net. “What Are Paid Up Additions (PUA) In Life Insurance?: Using PUA Riders as a Financing Strategy”.
- National Association of Insurance Commissioners. “Life Insurance”.
