Full life insurance payment status is when you do one of two things. When you make the required number of premium payments as stipulated in the insurance contract, you reach a payment position. Second, you can optionally create a paid-for whole life policy by triggering the low paid nonprofit benefits of the whole life policy.
How Paid-Up Whole Life Insurance Works
Paid-up whole life insurance means that you will not have to pay premium on the policy. Death benefit will be applicable. Additionally, the policy will generally continue to earn dividends if it is a dividend-paying whole life policy.
Reaching paid-up status provides peace of mind knowing that you can keep your life insurance and there will be no need to pay any future premiums.
You can continue taking loans against paid-up whole life policy. You can also withdraw any non-guaranteed cash value from a paid-up policy. Your paid whole life policy will also continue to enjoy the tax benefits available for whole life policies that have not reached paid status.
Reaching paid-up status
All policies throughout life have a premium payback period. The policy owner should have the number of periods to pay the premium before receiving payment Event. The Whole Life policy will specify this period in the contract and the insurance company cannot change this period after issuing the policy. Once the policy owner pays the premium for the full number of years specified under the contract, the policy becomes payable and no further premium is applicable.
The normal premium payment term is:
- Up to the age of 100
- 120 years old
- Up to the age of 65
- 10 years
- 20 years
The annual premium is lower for the same death benefit amount over a longer premium payment period. For example, you would be looking at a $ 1 million Whole Life policy, which requires a $ 15,000 per year premium if you are paid at age 100, but a policy with the same death benefit that is paid only after 10 years May reach an annual premium requirement of $ 45,000.
Whole-life policies with a lower premium payback period will accumulate more cash value in earlier years than policies with a premium payback period.
Using the redundancy paid-up feature
Another option to achieve paid status with a whole life policy is to use the low paid nonprofit benefits of a whole life policy. This feature is available on all general whole life policies issued in the United States.
This feature allows the policy owner to create a payable policy by reducing the death benefit to an amount supported by the cash value accumulated in the policy. The amount of the death benefit reduction depends on the age of the policy and the cash surrender value it currently holds.
Can I cash in a paid up policy?
Yes, you can cancel a whole life policy that has achieved paid status. If you do this, the insurance company will send you a check for the cash value of the whole life policy on the day you requested the policy to end. You may want to think twice before cashing in such a policy, as this decision is permanent and does not require future premiums for paid-up policies.
Will my paid-up policy pay the same amount of death as my non-paid-up policy?
Assuming the death benefit payable as equal, yes, your beneficiary will receive the death benefit from the policy paid, just as he would receive the death benefit from the non-paid-up policy. Receiving paid status does not change the way the insurance company handles the claim / death benefit.
Changes with the Whole Life Policy also occur very rarely when obtaining or changing payment status. In some cases, insurers may pay slightly different dividends to the policies being paid.
Paid-up status is an iconic feature of the whole life policy. Having death benefits that do not require future premium payments appeals to a large percentage of the population and is a unique feature of whole life insurance.