Deciding on what kind of life insurance to get? While many insurance seekers set their sights on Term or Whole Life, there is a world of rider options to customize your policy that will help you get the benefits you need when you need them. Paid-Up Additional Insurance (PUA) is a great example of a rider that can help you use your life insurance as an investment tool and way to accrue interest and cash value. So, how does it work?

 

What is a PUA?

 

First, let’s define exactly what a PUA is. A PUA is a rider, or amendment,  that is specifically available to add to a whole life policy. When you choose a PUA, you pay the cost upfront and this amount is added to the death benefit which is the amount paid out upon your death. Because the amount is already paid, there are no additional costs in the way of premiums and it also has the chance to earn additional value.

 

Benefits of a PUA

 

There are a host of advantages associated with a PUA, including:

 

• Tax Deferred Interest: Not only can your PUA accrue interest, the interest will have taxes deferred upon it for even bigger savings and investment opportunities.
• Avoid Medical Underwriting: Unlike other methods of increasing your policy amount, a PUA allows you to increase coverage without going through medical risk assessment. Along with being convenient, this can sometimes be the only way for those with poor health to increase their coverage.
• Better Payout Sooner: While a whole life policy without a rider would eventually catch up to a policy with a PUA, it would take a very long time. By adding a PUA, you dramatically increase what your loved ones will be guaranteed after your passing.
• Potential for Dividends: Though dividends on your PUA are not a given, insurance companies will typically pay them as long as the company is able to. However, well established companies give out dividends so consistently that they are almost considered guaranteed.

 

How to Add a PUA

 

In short, your PUA rider should be purchased at the same time that you obtain your policy. While you may have the chance to add it later, most companies will have stipulations and costs associated with your health and age at the time of purchase, so sooner is better.

 

Paying for your PUA

 

Depending on your policy, you may have the option to contribute as much or as little as you want to on a yearly basis. However, some policies require you to add the same amount each year. Failing to contribute this amount could force you to apply for the rider again later.

 

Choosing Your Policy and PUA

 

A PUA is a wonderful investing and insurance tool for many individuals, however; there are a host of variations to the type of initial policy and riders. Working with a company that knows your financial goals is critical to structuring your life insurance policy to benefit you and your loved ones. At Arbor Creek Financial, we understand how overwhelming it can be to choose your policy and our knowledgeable agents are here to help you get the most from your insurance. To learn more about the Arbor Creek advantage, call us at 1-866-462-6526.