Paid-Up Additions Option
A dividend option using dividends to purchase small amounts of single-premium paid-up permanent insurance, increasing both death benefit and future dividends.
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The participating policy dividend option that uses dividends to purchase additional paid-up whole life insurance is called:
Paid-up additions — The paid-up additions option uses each dividend to buy small amounts of fully paid-up whole life insurance, thereby increasing both the death benefit and the cash value without requiring evidence of insurability. It is one of the standard dividend options, along with cash, accumulation at interest, reduced premium, and one-year term. The purchased additions are paid up and cannot lapse, so they add permanent value to the policy. This option is popular with clients who want their coverage to grow over time using the policy's dividends. The additions also earn future dividends themselves.
National insurance concept
Under the paid-up additions dividend option on a participating whole life policy, policy dividends are used to:
Purchase additional paid-up whole life insurance — The paid-up additions option uses each dividend to buy additional paid-up whole life insurance, which itself earns dividends and builds cash value. This increases both the death benefit and the policy's cash value over time. The other dividend options under objective LIFE-II.E.10 include cash, accumulation at interest, reduced premium, and one-year term - each distributing the dividend differently.
National insurance concept
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