1. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    A paid up life insurance policy means that your policy needs no more premiums to stay in effect. You can quit paying on it, but you still have a life insurance policy. It is one of the advantages of permanent insurance to be able to "pay it up" and be done with payments.
    Answered on December 29, 2013
  2. 4249 POINTS
    Gary Lane
    President, Lane Independent Agency, Southern California
    To get a paid up life policy, you would normally pay more than the normal premium for a few years, resulting in no further premiums being ever due on a Whole Life Policy. One product which New York Life specializes in that does this is called Custom Whole Life, which is frequently bought by Grandparents to protect their Grand Children for the entire life of that grandchild. What a Gift! Sure beats toys. The proceeds can even be used to help fund a college education, when a loan is taken out on the policy for that purpose. Talk with a qualified agent. Gary Lane, Registered Representative and Agent, New York Life. 949 797 2424. Thank you.
    Answered on January 5, 2014
  3. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    Great question! Paid up means exactly what it sounds like. You don't have to make any more payments on it. That is an excellent position to be in, because you now have your policy, and can use the money that you had been paying for the policy on something else.If you have any more questions, please feel free to contact me, I'm happy to help. Thanks for asking!
    Answered on April 21, 2014
  4. 7479 POINTS
    Steve Kobrin
    President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
    Paid up life-insurance means you don’t make anymore payments on the policy.
    You still get the coverage, but you no longer have to pay for it.

    But here’s the question: suppose you wanted to keep paying? Why wouldn’t the insurance company allow you to do so?

    I mean, some of these permanent insurance policies can get very cash rich. Whole life policies can pay some pretty hefty dividends. Universal life policies can apply a pretty decent interest rate. As I am sure you have heard, there can be some great tax advantages to accumulating wealth inside life insurance: tax-deferred accumulation, and, under the right circumstances, tax-free distributions.

    So why wouldn’t an insurance company just let you go for it?

    A number of decades ago, they did. People were taking out policies with face amounts of $50,000 or $100,000, but putting huge amounts of cash into them. Huge amounts. They really milked the tax advantages of the product. Of course, the IRS got wise to this and imposed certain rules. These rules limit the amount of money that can grow inside these policies and still avoid taxation. You can exceed this limit, but then you get a tax bill.

    From this point of view, paid up means if you put more cash into the policy, you could create a taxable event.

    It also means something else, in consideration of the expenses of the policy. Let’s say you take out a universal life product with a guarantee to age 100. This means that given the proper payment schedule, both the premium and the death benefit will be guaranteed to a age 100.

    The emphasis is on the payment schedule. If you meet it, then no more payments would be required to secure those guarantees. It would be paid up. What’s interesting here is that, depending on the product, a lot of flexibility exists for designing a payment schedule.

    You can have continuous pay and simply pay the lowest amount required annually. You could have a single pay in which just one payment in the first year will get you what you want.
    You could have a 10 pay, which means you just pay for 10 years - and still get the guarantees. You could have 20 pay. And so on.

    Depending on your cash flow and other factors, you could pay up your policy with any number of strategies. And then you simply would not have to worry about paying for your life insurance, even though you would have the coverage for as long as you need.
    Want to keep learning? Read my blog: planrisklive.com
    Answered on October 18, 2015
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