What is Paid-Up Additional Life Insurance?

Whole life insurance offers substantial, lifelong protection for your loved ones through the death benefit and steady wealth-building potential through the cash value growth component. Normally, you can’t adjust your whole life death benefit coverage once you purchase the policy. However, if your whole life insurance pays dividends, you can reinvest them into paid-up additional life insurance for more coverage and cash value growth. This article explains how paid-up additions work, their benefits, and some alternatives to help you understand your options for using life insurance dividends.

How paid-up additions in life insurance work

Paid-up additional life insurance, or PUA, is extra coverage you can purchase with a PUA rider or life insurance dividends if your policy pays them. Purchasing paid-up additional life insurance helps increase your death benefit and cash value without raising your premiums.¹ As a result, you can get more coverage and faster potential tax-deferred growth without paying more out of pocket.

Benefits of paid-up additional life insurance

Paid-up additional life insurance offers you several benefits:¹

No increase in premium payments

Paid-up additional life insurance coverage represents coverage you already paid for with dividends the policy earned. Therefore, it does not require an increase in premiums. You’ll receive more coverage without expanding your life insurance budget or paying for more coverage upfront. This can be helpful if you need to boost coverage over the long term since premiums for new policies increase as you get older.

Larger death benefit

Reinvesting your life insurance dividends into paid-up additional life insurance coverage helps you to easily raise your death benefit coverage. This can help you grow your death benefit to keep pace with inflation or increasing income.

No additional underwriting

You may have to undergo a medical exam if you seek another traditional life insurance policy. Paid-up insurance, on the other hand, does not require new underwriting or medical exams. This helps you to boost your coverage quickly and conveniently as your needs change.

Increased cash value

Some of each payment you make on your policy goes into the cash value, including payments for paid-up additional life insurance. Therefore, purchasing paid-up additional life insurance helps you accelerate your tax-deferred growth without paying more.

Potential dividend compounding

The larger your death benefit, the more dividends you receive. Therefore, if you purchase more paid-up life insurance with your dividends, you could earn more if the insurer pays a dividend again.¹ This could help accelerate your coverage and cash value growth further.

Easier policy management

Paid-up additional life insurance helps make it easy to raise your coverage amount without purchasing and managing two separate policies. This means you have fewer premiums, death benefits, and cash values to track. As a result, managing your life insurance coverage can be easier.