Reply To: Paid Up Policy
Anmol Kaur
- A paid up policy is one that requires no further insurance premiums and continues to be a normal insurance policy till maturity or expiry date of the contract but with reduced benefits/sum assured in the event of a claim.
- Policy gets converted into paid up once it acquires a surrender value (Surrender value is acquired when you fail to pay renewal premiums for your plan even after grace period has passed; typically after 3 annual premiums payment in case of regular premium traditional insurance plans, after 2 annual premiums payment in case of limited premium traditional insurance plans and 5 years annual premium paid in case of Unit Linked Insurance Plan).
- Paid-up value is usually calculated as the number of Paid Premiums X Sum Assured /Total number of Premiums.
- ยท For the Unit Linked Plan a policy can be paid up after 5 years of regular premium payment but Mortality charges, administration charges, other policy maintenance charges continue to be deducted from the fund value.
Can you think of specific situations when this option would be exercised by policyholders?