Whole life insurance policies have a paid-up provision that offers two options to policy owners. Firstly, the policy becomes paid-up once the policy owner has made the necessary premium payments for paid-up status. Once the policy is paid-up, it remains in effect for the insured’s entire life. Secondly, policy owners can trigger the reduced paid-up feature of the policy before the premium paying period ends.
| Option | Description |
|---|---|
| Paid-up status | Policy owner satisfies premium payments necessary for paid-up status and the policy remains in effect for the rest of the insured’s life, accumulating cash value and earning dividends (if participating in dividends), and providing a death benefit. |
| Reduced paid-up status | Policy owner chooses the paid-up status with a lower death benefit, triggering the reduced paid-up feature of the policy before the premium paying period ends. The life insurance company evaluates the policy’s current cash value and calculates the death benefit amount supported by that current cash value amount. The newly calculated death benefit will be less than the original death benefit and becomes the effective death benefit after choosing the reduced paid-up option. |
The premium payment period determines the number of premiums the policy owner must make to satisfy the paid-up feature of the policy. For instance, if the policy is paid-up at age 65, the policy owner doesn’t have to pay premiums after age 65, but the policy remains in force, accumulating cash value and earning dividends (if participating in dividends), and providing a death benefit. Paid-up life insurance means the whole life insurance policy is paid in full, remains in force, and the policy owner doesn’t have to pay any more premiums.
Overall, paid-up whole life insurance is an excellent option for individuals who want to ensure their loved ones are financially secure even after their lifetime. It provides a guaranteed death benefit and accumulates cash value over time, making it a valuable asset for policy owners.
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Article Sources
- DFS (Department of Financial Services). What'S A Fully Paid-Up Life Insurance Policy?
- National Association of Insurance Commissioners (NAIC). Paid Up Life Insurance
- Foresters Financial. Whole Life Insurance Definition: How It Works, With ...
- Investopedia. What Are The Principal Types Of Life Insurance?
- Aditya Birla Capital. What Is A Whole Life Insurance Policy?