Whole Life Insurance and A La Carte Options

Whole Life Insurance and A La Carte Options

Whole Life Insurance and A La Carte Options

Every whole life insurance policy has an a la carte menu of different add-ons you can put onto the life insurance product.  These “add-ons” are known as Riders.

When creating a cash-rich policy, the Paid up Additions rider is a necessary component.  What are paid up additions? How does one purchase them and why you want them in your policy?

What is a Paid Up Additions Rider?

Technically, the paid up additions allows you to purchase more coverage or death benefit in your policy.

By doing so, the “paid up” insurance also adds cash value or cash reserve to your policy.  This cash value amount is equal to the paid up price.

For example, if you put $100 into the paid up additions, the paid up additions cash value equals $100.The paid up additions are available immediately in the policy.

The death benefit is typically a multiple of the incoming paid up additions payment (e.g., the $100 amount purchasing paid up additions with an insurance company may purchase $300 in additional death benefit).

How Do Paid Up Additions Work?

Paid up additions can be purchased by the owner of the policy; however, there will be limitations on the amount of paid up additions a person can purchase.

This amount is based upon the IRS limitation called the MEC Limit.

The dividends can also be used to purchase paid up additions.  This would be similar to reinvesting your dividends in a mutual fund.

Why You Want Paid Up Additions In Your Policy?

Reason 1:  The paid up additions cash value is available immediately in the policy for use (e.g., the Cash Flow Banking System or the Income for Life Program).

Reason 2:  Because paid up additions are available, the policy begins earning growth and dividends immediately.

Reason 3:  A whole life insurance policy with this rider will grow a lot faster than a policy without this rider.

Reason 4:  Using the Paid up Additions rider will increase the internal rate of return on your policy since the cost of insurance is associated with the base premium.

The paid up additions rider will play an important role in the creation of your cash-rich policy.

If you are looking to get more information on the how paid up additions will work in your policy, the next step is to run at an illustration of a policy tailored to you.

Talk with a Paradigm Wealth Strategist today.

– Justin Martin

Justin Martin completed his undergraduate studies at Brigham Young University and later graduated with his MBA from Texas A&M University.  He is a Register Financial Consultant (IARFC), and an Agent of Paradigm Life. He has spent 12+ years working in and researching the financial industry.  Justin currently resides in Salt Lake City, Utah with his wife and three kids.  Click here to view more information on Justin Martin. 

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