The paid-up additions (PUA) rider is a unique additional insurance feature that comes with utilizing whole life insurance. To understand how PUA works, you must first understand one of the most attractive features in owning whole life insurance—the cash value.
The cash value in your policy provides liquidity for anything you decide to use it for. To enhance this living benefit of life insurance, a lot of policy owners choose to add a paid-up additions rider to enrich the cash value of their policy and increase the overall policy growth.
Paid-up additions riders can only be purchased separately from your policy, and is considered additional insurance. Not only does a PUA rider provide an immediate inflation of cash to your policy, owners who choose to add a paid-up additions rider do not have to undergo medical underwriting, making this feature excellent for those who have declining health.
Using PUA Riders as a Financing Strategy
When you purchase a whole life policy, and are using the cash value as a tool or strategy to finance other performing assets, it is advantageous to add a paid-up additions rider, otherwise you are subject to slow cash value growth. When trying to maximize your policy’s cash value benefit, there is no other way to do that than with the paid-up additions rider.
Dividends & PUA Riders
Mutual insurance companies typically pay out dividends each year. Though dividends are not guaranteed, most mutual insurance companies have such a long history of dividend payout (even during the Great Depression), that receiving a dividend can be expected (Forbes.com).
Paid-up additions riders can be purchased with dividends and can themselves earn dividends. Just like a policy’s inherent cash value compounds over time, so does the PUA rider, making your life insurance asset that much more valuable with tax deferred growth.
Life Insurance & PUA Riders
The beauty of whole life insurance is that the asset provides not only a death benefit, but very valuable living benefits too. Whole life policies come with tax-deferred growth, liquidity, and market security. On top of those inherent benefits, add a paid-up additions rider and you are immediately increasing the cash value, the growth, and the tax deferred benefits.
Life insurance and paid-up additions riders are an excellent wealth building strategy.
To add a paid-up additions rider to your policy, or to learn more, speak with a Paradigm Life Wealth Strategist. You can schedule a complementary appointment here.
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