Paid-Up Insurance
Paid-up insurance is a life insurance policy that requires no further premium payments because the cash value has grown enough to cover all future costs, or it was purchased as a nonforfeiture option.
🎬 Video Explanation
Exam Tip
Paid-up = no more premiums required. Reduced Paid-Up = nonforfeiture option with SMALLER death benefit but lifetime coverage.
What is Paid-Up Insurance?
Paid-up insurance is a permanent life insurance policy that requires no additional premium payments. The policy remains in force for life with a guaranteed death benefit, funded entirely by the accumulated cash value.
How Insurance Becomes Paid-Up
| Method | Description |
|---|---|
| Premium Completion | All required premiums paid (e.g., 20-pay life) |
| Nonforfeiture Option | Convert existing policy using cash value |
| Paid-Up Additions | Dividends used to purchase additional coverage |
Reduced Paid-Up Insurance
As a nonforfeiture option:
- Original policy's cash value purchases smaller permanent policy
- Death benefit reduced from original amount
- No more premiums required
- Coverage guaranteed for life
- Still accumulates cash value
Paid-Up Additions (PUA)
- Available with participating whole life policies
- Dividends buy small amounts of single-premium whole life
- Each addition is fully paid-up
- Increases death benefit and cash value
- Popular dividend option
Paid-Up Status Comparison
| Type | Premiums | Death Benefit | Cash Value |
|---|---|---|---|
| Paid-Up Addition | None (dividend-funded) | Small additions | Grows |
| Reduced Paid-Up | None (from nonforfeiture) | Reduced | Grows |
| Limited Pay Whole Life | None (after pay period) | Original | Grows |
Benefits of Paid-Up Insurance
- No more premium payments required
- Guaranteed lifetime coverage
- Continues to build cash value
- Can borrow against cash value
- Provides certainty of coverage
Study This Term In
Course Playlist79 videosVideos120 videosBlogs70 blogs RadioThird-party resources · We may earn a commission from purchases.
Life and Health Insurance License Exam Prep 2025-2026: Ace Your First Try with Proven Strategy, Full-Length Practice Tests, Detailed Answer Explanations
By Publishing, Sageway
$24.99 · 
Online course on Mometrix
Take courses on Udemy
Prep course on AchievableRelated Terms
Whole Life Insurance
Whole life is permanent life insurance with a contractual death benefit, scheduled premiums and guaranteed cash values if its terms are met. Participating policies may also pay non-guaranteed dividends.
Cash Value
Cash value is the savings component of a permanent life insurance policy that grows tax-deferred and can be accessed through loans or withdrawals during the policyholder's lifetime.
Nonforfeiture Options
Nonforfeiture options let an owner use the available value of a cash-value life policy when surrendering it or discontinuing premiums. Available options and net benefits depend on the contract.
Reduced Paid-Up Insurance
Reduced paid-up insurance is a nonforfeiture option that uses a policy's cash value to purchase a smaller permanent life insurance policy that is fully paid up, with no further premiums required but a reduced death benefit.
Your AI study companion · 10 free interactions a day
Stay Updated
Get free exam tips and study guides delivered to your inbox.