Reduced Paid up Policy
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Rishabh Surana
The insurance company provides you with this option where in they will let the policy continue to its maturity with no premium expectation from you – the caveat is that the sum assured that was in existence when the policy was taken will now be reduced substantially. This is done by making the policy paid-up. The reduced sum assured is called the paid-up value of the policy. Once a policy acquires a guaranteed surrender value post payment of 3 annual premiums, it can be made paid up if in any of the future years premium is not paid. Reduced paid up Sum Assured = Original Sum Assured x (No of premiums paid / Total No of premiums payable in the policy)
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http://forum.theactuarialclub.com/viewtopic.php?t=2739
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