The Paid Up Additions Rider (PUAR) is a unique additional insurance feature that comes with utilizing whole life insurance. To understand how PUA works, you must first understand one of the most attractive features in owning whole life insurance the cash value.
The cash value in your policy provides liquidity liquidity for anything you decide to use it for. To enhance this living benefit of life insurance, a lot of policy owners choose to add a paid up additions rider to enrich the cash value of their policy and increase the overall policy growth.
Paid Up Additions Riders can only be purchased separately from your policy, and is considered additional insurance. Not only does PUAR provide an immediate inflation of cash to your policy, those owners who choose to add a paid up additions rider do not have to undergo medical underwriting, making this feature excellent for those who have declining health.
Using Paid Up Additions Riders as a Financing Strategy
When you purchase a whole life policy, and are using the cash value as a tool or strategy to finance other performing assets, it is advantageous to add a Paid Up Additions Rider, otherwise you are subject to slow cash value growth. When trying to maximize your policy’s cash value benefit, there is no other way to do that than with the paid up additions rider.
Dividends and PUAR
Mutual insurance companies typically pay out dividends each year. Though dividends are not guaranteed, some insurance companies have such a long history of dividend payout (even during the Great Depression), therefore receiving a dividend can be expected (Forbes.com).
Paid up additions riders can be purchased with dividends and can themselves earn dividends. Just like a policy’s inherent cash value compounds over time, so does the PUAR, making your life insurance asset that much more valuable with tax deferred growth.
Life Insurance and Paid Up Additions Riders
The beauty of whole life insurance is that the asset provides not only a death benefit, but very valuable living benefits too. Whole Life Policies come with tax deferred growth, liquidity, and market security. On top of those inherent benefits, add a Paid Up Additions Rider and you are immediately increasing the cash value, the growth, and the tax deferred benefits.