Whole Life Insurance Dividend Option
Paid Up Additions for Your Whole Life Insurance
Paid up additions are another very common dividend option for whole life insurance policies. If you are not aware that whole life insurance policies in Canada pay you dividends, please see the other articles in this series.
Other Articles in the Dividend Option Series
When electing the Paid Up Additions (PUA) as your dividend option you use 100% of the dividends being paid out each year to buy you additional blocks of permanent whole life insurance, paid up for life. For example, you received a dividend of $500 in the first year, it might buy you $2,000 of permanent paid up whole life insurance. Therefore, your total amount of life insurance has now increase buy $2,000. The cash value of the policy has only increase by $500, not the full $2,000 of additional death benefit.
As time goes on the dividends increase. This is common of all maturing whole life insurance policies. A more mature policy has a larger cash value and produces more dividends. Also, the additional paid up whole life insurance blocks you are buying throughout your life are also eligible for dividends, so a growing policy will produce larger dividends over time.
As you age, the cost of insurance also continues to up. So, the same amount of money paid out in the dividend 10 years ago will not buy you the same amount of permanent life insurance now. The fact is your annual dividends are increasing faster than your cost of insurance which means that your total amount of whole life insurance tends to accelerate throughout your life, not decline. All I’m trying to say here is that your age cost of life insurance coverage will temper this increasing death benefit. It will always be very healthy and higher than you ever thought possible, but it will never become exponential growth.
The cash value inside a whole life insurance policy is based on the guaranteed cash value which all whole life policies have and a variable cash value. Together they produce the total cash value. The variable cash value amount is based on the cash dividends paid out. As in the example above, if the insurance company pays out a $500 dividend, then your variable cash value increases by $500. As time goes by that $500 helps your policy grow. This is because the total cash value inside a whole life insurance policy increase the amount of dividends paid on that policy in the next year. This is reflective of getting an interest rate on your cash value inside the policy. In effect, the bigger the policy and the larger the cash values, the bigger the returns on that policy the following years, as reflective of an increased dividend.
If you would like to know how you can buy a whole life insurance policy with a guaranteed premium and a growing amount of coverage, we can show you how this is done. Participating in the dividend scale of a life insurance company can be one of the safest and best steady returns in your investment portfolio. For example, Canada Life’s whole life dividend payout has averaged a 7.5% annual return to policy holders over the last 50 years.
Whole Life Insurance Advice from Life Guard Insurance
Paid up additions are one of the most common dividend options chosen by whole life insurance policy holders today. It will turn your whole life insurance policy into a high performing, long term growth product which creates substantial wealth for your estate over time.
Feel free to contact Life Guard Insurance to find out more about how a whole life insurance plan with paid up additions might work for you.
The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about paid up additions dividend option for whole life insurance would be very much appreciated.