Some participating whole life companies sell 10 pay, 20 pay and pay to age 65 paid up policies. Participating whole life policies may generate enough paid dividends to pay premiums for the life of the insured. To determine whether your existing whole life policy has adequate cash values to be paid up, order an in force ledger based on paid dividends only.
Co-Founder, Coastal Financial Partners Group, California
If a life insurance policy is truly "paid up" it simply means no further premiums are due and it is guaranteed to be that way.
Some people use the term "paid up" incorrectly to describe premium "offsets" using dividend values to pay required premiums. Such arrangements are not paid up and not guaranteed. More on this in the last paragraph.
Some whole life policies are designed to be paid up at a relatively early duration e.g. Policy Year 20, Age 65, etc. The premiums for these policies are relatively high as a result. In comparison, in most cases, whole life policies are designed to have required premiums to age 95 or 100 or later. Such policies have relatively low premiums and are not paid up until age 95 or 100.
A policy can also be "paid up" at a lesser value than the death benefit. Whole life policies feature a "reduced paid up" non forfeiture provision. In the event the policy owner wishes to stop paying annual required premiums, the policy owner can ask the insurer to reduce the death benefit amount for the policy so that no further premiums would need to be paid.
It is important to note that policies which use policy dividends and/or the cash value of Paid Up Additions to offset the required premiums due at some future point are not "paid up". In a low interest environment like we have now, dividends are being reduced from what was illustrated. Many clients who expected to stop paying premiums and instead pay them via the dividend values in their policy cannot do so yet since the dividend values are not sufficient to offset premiums.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
When a whole life insurance policy is “paid-up,” the requirement to make premium payment stops. The death benefit will be paid to those who you love when your death occurs. You still have a great many rights over the policy and can still surrender it for cash. Contact your agent if you have concerns about your paid-up policy.
Regional Marketing Director, Capital Choice Financial Group,
When whole life insurance is paid up your obligation to pay premiums stops but your policy stays in force for your beneficiaries. How this works is the company charges higher premiums for a "paid up" policy in the early years. Then at a particular time that is designated the paid up time in the contract the company starts taking cash values out of the policy to pay the premiums. Remember, there is no free lunch. This type of policy is not good for the consumer.
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Some people use the term "paid up" incorrectly to describe premium "offsets" using dividend values to pay required premiums. Such arrangements are not paid up and not guaranteed. More on this in the last paragraph.
Some whole life policies are designed to be paid up at a relatively early duration e.g. Policy Year 20, Age 65, etc. The premiums for these policies are relatively high as a result. In comparison, in most cases, whole life policies are designed to have required premiums to age 95 or 100 or later. Such policies have relatively low premiums and are not paid up until age 95 or 100.
A policy can also be "paid up" at a lesser value than the death benefit. Whole life policies feature a "reduced paid up" non forfeiture provision. In the event the policy owner wishes to stop paying annual required premiums, the policy owner can ask the insurer to reduce the death benefit amount for the policy so that no further premiums would need to be paid.
It is important to note that policies which use policy dividends and/or the cash value of Paid Up Additions to offset the required premiums due at some future point are not "paid up". In a low interest environment like we have now, dividends are being reduced from what was illustrated. Many clients who expected to stop paying premiums and instead pay them via the dividend values in their policy cannot do so yet since the dividend values are not sufficient to offset premiums.