What is a paid-up insurance policy?

Posted by: Labdhi Mehta on Dec 11, 2017, 12.28 PM IST

1. A paid-up policy is one that requires no further premium payments and continues to provide benefits till maturity.

2. A policy can be converted to a paid-up policy once it acquires a surrender value which is typically after 2-3 annual premiums are paid for traditional plans. For Ulips, there is a lock-in period of 5 years.

3. Paid-up value is usually calculated as number of paid premiums X sum assured /total number of premiums.

4. In case of a paid-up Ulip, the policy administration charges, mortality and fund management charges continue to be applicable and negatively impact the fund value.

5. This is a useful option when one is stuck with an inappropriate product due to wrong selection and can be opted for instead of surrendering the policy to avail of a life cover.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Dec 11, 2017, 12.28 PM IST