Paid-up additional insurance is extra coverage you can access through whole life insurance policies. Using your cover’s dividends, you buy paid-up additional insurance as a rider that allows you to increase the cash value, thus enhancing your living benefit and death benefit.
Throughout this article, we’ll simplify the paid-up additional insurance debacle, explaining the terms as we go to ensure you gain a well-rounded understanding.
Instead of premiums, you use the policy’s dividends to purchase paid-up additional insurance. The additions themselves then start earning dividends, and your account experiences indefinite compound value growth over time.
PUA (i.e., paid-up additional insurance) is a type of policy rider. Let’s take a moment to consider the definition of a rider in this context.
A life insurance rider is an extra form of insurance that you can add to your basic policy to increase protection and raise the benefits. Numerous types of riders exist, some of which are free and some are paid. But usually, paid riders are low in price, thanks to the minimal underwriting needed.
In a nutshell, they allow you to tailor your permanent life insurance policy to meet specific needs.
Some insurers call riders different names depending on their particular product. However, the most popular types of life insurance riders in Canada are as follows:
Your paid-up additional insurance’s cash value could inflate over time, all of which are tax-deferred. If necessary, you can use them to heighten your coverage without needing another medical underwriting. Not only is this wonderfully convenient, but it also adds extra value for you if your health has declined since you began the policy.
However, it’s worth considering that the paid-up additional insurance could come with a larger premium than your standard policy. Why? Because the cost depends on your age at the time of purchase.
Policies that allow you to purchase paid-up additions generally have a smaller cash value and a reduced death benefit than covers without this option. With that said, its net cash value increases faster than regular whole life insurance coverages.
Ideally, you should acquire paid-up additions when you buy your life insurance policy. Several providers allow you to add the rider later. However, factors like age and health make it an arduous process.
The paid-up additional insurance policies vary wildly from company to company. Some insurers allow you to supply as much or as little as you feel like it. But others request contributions remain the same throughout.
Before making a decision as to whether a paid-up addition rider is the best option, keep the following three aspects in mind:
Is paid-up additional insurance the right option for you? If you’re having trouble deciding, give Sim Gakhar a call. Through tried and true assessments and tailored strategies, Sim can help you make the rider choices that fit your budget, lifestyle, and beneficiaries.
Book a call using the secure, easy-to-navigate online calendar and find peace with paid-up additional insurance.
Copyright © 2022 | Sim Gakhar