What are paid up additions in a life insurance policy? In short, they’re coverage increases that you buy to add onto an existing whole life insurance policy. The best part? It can often be done with zero money out of your pocket. How is that even possible? We’ll explain everything below.
Paid up additions are segments of extra coverage that you add to a whole life insurance policy. Insurers each have their own rules for how and when you can buy them. You can pay for them in several ways:
If you use the last two methods, you don’t have to pay anything out of pocket to increase your coverage. That means your monthly payment amount stays exactly the same, although you now have more coverage in place.Get a Free Quote Now
Rather than being added onto your original policy, every paid up addition acts like a miniature policy within a policy. Each addition earns its own cash value. Each addition has its own death benefit amount. And because it’s paid for in full, it earns cash value even faster than your main policy.
How is that possible?
Permanent life insurance policies earn cash value over time. That cash value comes from interest the insurer pays on a portion of every payment you make. The idea is that, by the time the policy matures, the cash value is equivalent to the death benefit that must be paid to the beneficiary(ies). It’s designed to break even, in other words. But with paid up additions, there’s no need to break even. The addition is fully funded from the get-go, so it earns cash value until the day it’s paid out to your beneficiary(ies).
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Some of them do, yes! You’ve probably heard of stocks that pay dividends. These life insurance policies operate the same way. They’re often offered by mutual companies, which are owned by the policyholders. (You can tell which insurers these are because they usually have “mutual” in the name, like Mutual of Omaha, MassMutual, and Penn Mutual.)
These are always whole life policies – specifically, a type called “participating whole life.” The “participating” means that you, as the policy owner, participate in the company’s profits by receiving dividends. The amount of dividends you get depends on three things:
The more invested you are in the company (i.e., the more cash value and death benefit coverage you have), the higher your dividend will be. You can choose to use those dividends to buy paid up additions, giving you more coverage without paying a dime.
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You shouldn’t just be asking “What are paid up additions life insurance policy?” You should also be asking how they can add to your long-term financial portfolio, too. There are several great reasons to consider a participating whole life policy so you can take advantage of paid up additions over time:
If you want a policy that offers paid up additions, give us a call at (800) 521-7873! We’ll get you quotes for whole life policies that qualify so you can start building your life insurance cash value.Get a Free Quote Now
If you like the idea of using future cash value and dividends to buy paid up additions, here’s what you want to ask your agent before you buy:
So, to answer the question, “What are paid up additions life insurance policy?”, we can say they’re a great way to increase your coverage and earn more cash value without having to spend extra money. We can help you find the right policy at the right price, from one of the country’s top-rated insurers. Give us a call at (800) 521-7873 or email us at firstname.lastname@example.org to get started!Get a Free Quote Now