More than half of all people living in the United States are covered by some form of life insurance. However, many of these people do not have paid-up additional (PUA) insurance, or even know what it is.
The paid-up additions rider is an interesting additional insurance tool that is available when you purchase whole life insurance. In order to understand what a paid-up additional rider is and how it works, we first need to go over what riders in general are and why you should add them to your life insurance policy.
Are you interested in learning more? If you are, then keep on reading and we will take you through everything that you need to know!
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What is a Life Insurance Rider?
A life insurance rider is an additional form of insurance that you can add to your policy. It offers increased protection and benefits.
Some insurance riders don’t cost anything, while you have to pay for others. The rider that you pay for is usually added to the cost of your yearly premium.
You can think of a life insurance rider like a cable bill. Some channels you get at no extra cost. However, there are also premium channels that you need to pay extra for. However, unlike a cable bill, your insurance premium isn’t going to go up.
Kinds of Life Insurance Riders
Your own insurance provider might have a slightly different name for their specific insurance product. Despite that, let’s go over the ten most common kinds of life insurance riders that you need to know about.
Paid-Up Additions Rider (PUA)
For this rider, you pay additional premiums in the beginning years of the insurance policy. This allows for quicker growth of the cash value. You’ll also be able to receive greater returns.
This rider tends to cost extra.
Guaranteed Insurability Rider
With this rider, you get to add extra coverage at a later time, within a certain term. And you can do this without any extra medical exam.
It also usually costs extra.
Terminal Illness Rider/Accelerated Death Benefit Rider
With the terminal illness rider, you get a percentage of your death benefit while you are still alive if you are diagnosed with a terminal disease. This rider is typically included in your policy for free.
Chronic Illness Rider
With a chronic illness rider, you get a percentage of your death benefit while you are still alive if you get diagnosed with having a chronic illness. This rider is also typically included for free in your policy.
Same-Insured Term Rider/Flexible Protection Rider
With this rider, get to include term insurance with your whole life insurance plan. And you get to do it for less money.
This boosts your death benefit. However, it tends to cost extra money to attach this rider.
Waiver of Premium for Disability Rider
You get to suspend premium payments if you become disabled. However, you still get to earn interest as if you were still paying the premium. It usually costs extra for this rider.
Long-Term Care Rider
A long-term care rider covers your long-term care needs, including hospice and nursing homes. It typically costs extra.
Spouse/Child Insurance Rider
This rider provides extra benefits for the death of a specified member of the family. It tends to cost extra.
Accidental Death Benefit Rider
This rider provides additional benefits to your beneficiary if it is decided that you died in an accident. This rider tends to be included at no extra cost.
Convertible Term Insurance Rider
This insurance rider lets you convert a term insurance policy to a permanent insurance policy within a certain term. And you don’t need an extra medical exam to do it. This rider usually costs extra.
Understanding Paid-Up Additional Insurance
Over time, the cash value of paid up additions can go up over time. And you can defer these cash increases on your taxes. You can also use the increase to boost your coverage without the need to go through the medical underwriting process.
You may have a higher premium with paid-up additional insurance over your base policy because the price will depend on your age when you buy the insurance rider.
A PUA rider needs to be designed into a policy when you buy it. Some providers might let you add the rider later. However, age, health, and other factors might make this more challenging.
Policies for PUA riders can vary between insurance providers. For some companies, the PUA rider lets you contribute as much or as little money as you wish from year to year. Other providers tell you how much you can contribute.
You can also choose to roll the cash value of your insurance policy into PUA insurance. When this happens, the policy is able to make its own premium payments. So the premiums can potentially become covered for the rest of the policy.
The Importance of Knowing About Paid-Up Additional Insurance
Hopefully, after reading the above article, you now have a better idea of what paid-up additional insurance is. As we can see, PUA insurance riders have the ability to help you boost the cash value of your policy and might even pay your premiums over time. If this sounds like something you’re interested in, then you should definitely speak with your life insurance provider.
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