The paid up additions rider or PUA rider, it has been talked in length in books like Bank on Yourself and Infinite Banking.

So what are paid up additions?

In this article we help you will get the answer and you will learn how to use paid up additions. 

What is the PUA Rider by TheG

Definition

So let’s look at a normal definition of paid up additions. Here it a definition from Investopedia:

Paid-up additional insurance is additional whole life insurance that a policyholder purchases, using the policy’s dividends. Paid-up additional insurance is available as a rider on a whole life policy. It lets the policyholder increase their living benefit and death benefit by increasing the policy’s cash value. Paid-up additions themselves then earn dividends, and the value continues to compound indefinitely over time.

Ok that seems like a lot of words but it’s hard to understand and it really doesn’t describe what it is.

We have a better way of thinking of paid up additions. 

Mini Whole Life Policies

I want you to imagine paid up additions as mini paid up whole life insurance policies inside of your whole policy.

A paid up policy means that you don’t have to pay any more premiums for it. But you still get to keep your death benefit and cash value. In this case your mini death benefit and your mini cash value.

Even-though you don’t pay more premiums for the mini policies, they earn dividends, and they have a death benefit and cash value.

Also the mini policies grow by themselves overtime and you can access their cash value at any time. 

So How Do I Chose Paid Up Additions?

First of all, paid up additions is a feature that exists in all participating whole life insurance. This feature represent how you decide to receive your dividends.

You can elect to get paid up additions among many other options:

  • Receive cash
  • Reduce your premium
  • Pay back loans

But most of the time you will end up using a Paid Up Additions (PUA) rider, as it will be your best bet. 

PUA Rider

Most whole life policies have a rider that will let you get these paid up additions. Many companies use different names. The most common names you will find for this rider is:

  • Paid Up Additions Rider (PUA or PUAR)
  • Addition Life Insurance Rider (AILIR)

Each dividend you earn will go to purchase paid up additions. 

What does it do?

The main reasons that paid up additions are important is because they help:

  • Grow Cash Value
  • Grow Death Benefit

The main reasons that they are almost always used is because the give both cash and death benefit at the same time. 

Compounded Interest

As Einstein mentioned compound interest is the eight wonder of the world.

You probably already know but compound interest helps grow money exponentially over time.

In our PUA rider case, each paid up addition adds cash value, which earns dividends. These dividends add more paid up additions which then earn dividends themselves… etc etc.

This is the method how whole life insurance policies grow over time. 

PUA Rider Example

So let’s look at a sample Illustration with Paid Up Additions Rider. The following is a quote from a Mutual company for a 35 year old male in great health.

We added $5,000 a year of paid up additions for 10 years.

 

Paid Up Additions

The previous is an example of using the PUA rider to add more cash value to the policy.

This is the method used in Infinite Banking and Bank on Yourself.

Here is the same illustration without the paid up additions rider:

No Paid Up AdditionsAs you can see there is a significant difference in the cash value. This makes sense as we are paying more money into the policy.

You have $100,000 more over 20 years even though you only paid $50k over 10 years. 

More Paid Up Additions

The great news is that it isn’t hard to get a policy with paid up additions. All you need to do is ask a good agent and they should know what to do.

But be careful, because most agents do not know how to design a good policy.

The true way to maximize these paid up additions is to get an overfunded policy.

Final Word

Paid up additions are a normal feature of all policies. But to get a great policy you can add paid up additions rider that will turbo charge your policy.

Feel free to contact us for a whole life with paid up additions.

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