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Overview of Reduced Paid-Up Life Insurance

Reduced paid-up life insurance is an option that many people are currently happy they have purchased. Most people opt for this because, for example, it covers the payments on life insurance if they accidentally skip a payment or lose their job, or are somehow otherwise unable to make a payment.

The way that reduced paid-up life insurance works is that the insurance company pays the premium for you but then deducts that amount, or a specified amount -- depending on the contract you make with the insurance company -- from what your beneficiaries will ultimately receive should you pass away.

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Benefits of reduced paid up insurance

Interestingly enough the cash value remains the same even when a payment is skipped or not made. Reduced paid-up life insurance is most commonly available for interest sensitive whole life policies and other whole life policies. Whole life policies have premiums that are paid steadily and are characteristically payable for the policyholder's entire life, thus the name "whole life."

For those who are still relatively young, this is a type of insurance that will have substantially lower premiums. It is also possible to receive dividends back from your policy. Thus, it may be a good move to get a whole life policy with a reduced paid-up life insurance option when you're young.

It is important to note that this option can only be exercised at the beginning of the policy, so if you believe that this is a good idea for you and your beneficiaries, then be sure and ask your agent prior to beginning the policy.

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