what is paid up additional insurance 
paid up additional life insurance can be thought of as small chunks of whole life insurance purchased with dividends from a whole life policy each paid up addition pua has its own death benefit and cash value and also earns dividends this makes them an effective way to increase the cash value and death benefit over time without medical underwriting or increasing the premium payment understanding paid up additional insurancepaid up additions are just that paid up which means that unlike your base policy you don t have to pay premiums on them once purchased keep in mind that these are very small packets of life insurance on their own they wouldn t be worth much but if you use dividends to purchase paid up life insurance over time their value can compound as they also earn dividends which can be used to purchase more paid up insurance the net effect can be a significant increase in the value of the policy not only does that mean a larger death benefit but also a larger cash value another benefit is that paid up additions increase coverage without going through medical underwriting this is not only convenient but especially beneficial if your health has declined since the policy was issued poor health can increase the cost of life insurance or make you ineligible for a policy entirely if you can t increase life insurance coverage through other means having the option to purchase paid up additional life insurance is invaluable and since paid up additional insurance works just like regular insurance you can surrender paid up additions for their cash value or take a loan against them you can only purchase puas in participating whole life policies those that pay dividends however they are one of many ways you can use your dividends other ways include reducing your premium adding to the cash value and receiving a cash check participating whole life insurance policies those that pay dividends are offered by mutual life insurance companies many life insurance companies also offer a paid up additions pua rider which lets you pay extra premium dollars in order to purchase more puas than you could with dividends from the base policy alone this can be a turbocharged way to increase the cash value and death benefit especially since the value of paid up additional life insurance compounds over time as it earns dividends which can purchase even more life insurance a paid up additional insurance rider must be structured into the policy when you purchase it some companies may allow you to add it later but health age and other factors could make that difficult pua riders vary among insurance companies they often have slightly different names such as additional life insurance rider or paid up additions rider or paid up additional life insurance rider they may work differently as well for some the rider is flexible allowing you to contribute between a maximum and minimum amount to the rider each year other companies stipulate that contributions remain at consistent levels or you might lose the rider and need to reapply for it in the future if you take two otherwise identical whole life insurance policies with the same annual premium but one has a pua rider and one doesn t the one with the rider may have a higher guaranteed net cash value sooner than the one without 1 however in most cases the policy with the pua rider will initially have a lower cash value and much lower death benefit it will take many years possibly decades for the two policies to have similar death benefits for this reason whole life insurance with a pua rider should be viewed as a long term strategy to maximize the cash value and death benefit special considerationsonly member owned mutual insurance companies issue dividends dividends are not guaranteed but they are generally issued annually when the company is doing well financially but some standout life insurance companies have a very long history of annual dividend payments and are unlikely to break their records making these companies a good choice for dividends if you don t want to use dividends to purchase paid up additional insurance you can use them instead to lower the premium earn interest reduce loan payments or you can receive a check reduced paid up insurance is different from paid up additional insurance the former is a nonforfeiture option that allows the policy owner to receive a lower amount of fully paid whole life insurance if a policy with cash value lapses 2 the attained age of the insured and the cash value determine the face value of the new policy as a result the death benefit is smaller than that of the lapsed policy example of paid up additional insuranceconsider a 45 year old male who purchases a whole life policy with an annual base premium of 2 000 for a 100 000 death benefit in the first year of the policy he decides to contribute an additional 3 000 to a paid up additions rider the paid up additions will give him an immediate cash value while adding 15 000 to his death benefit if he continues to purchase paid up additions he will continue to increase his cash value and death benefit as time goes on 