A Paid Up Additions Rider by DEFINITION is: a rider that allows the owner of the life insurance contract to make additional cash contributions to the policy, resulting in a number of advantages that may include the addition of paid up life insurance, which increases the death benefit and cash value.
By including a paid-up additions rider ("PUA") and doing a IBC policy, you can create a way to purchases additional paid-up permanent life insurance with no proof of insurability, which in effect can increase the cash value and death benefit proportionately.
The additional paid up life insurance can also earn life insurance dividends, which compounds the cash value growth inside the policy. However, I should point out that paid up additions should not be confused with the paid up additions dividend option in a policy. The dividend option to purchase more paid up additions is another separate feature of the policy that must be added.
The key thing to understand about paid up additions, and the reason that it is a "game changer" is that it turns traditional life insurance policy design on its head, converting it from a "death benefit focused" product into a cash savings and accumulation asset.
As I've often pointed out, traditional policies focus on the "BASE PREMIUM" for maximum "DEATH BENEFIT" and thus are expensive an allow for SLOW cash accumulation. The PUA design; however, focuses on MINIMIZING DEATH BENEFIT and MAXIMIZING CASH put into the policy. As a cool twist, this can also grow your death benefit.
