Paid up additions – What does PUA mean?

PUA (PUAR) rider or simply the paid-up additions rider is a unique feature of insurance that has been discussed at length in designing a policy or system of policies that would enable the policy owner to properly implement The Infinite Banking Concept, developed by the late R. Nelson Nash. In this article, we’ll talk about paid-up additions and how it suits this often neglected, and often misunderstood, financial freedom tool known as participating dividend paying whole life insurance coverage.

Paid Up Additions Cash Values Growing Ascendant

Definition of Paid Up Additions

A paid-up addition (PUA) is another layer of death benefit that is added to a policy. Each PUA can be purchased by way of additional deposits (a.k.a. ADO or EDO), by dividends, or a combination of both. Each PUA also earns dividends every year they’re declared and each PUA must accumulate it’s equivalent in cash value by age 100 of the life insured. This additional growth is an advantage to the policy owner while the life insured is alive and when the life insured dies.

Now, that is a wordy definition, but it still seems difficult to understand, and it doesn’t define what it really is.

Mini-Whole Life Policies

Now try imagining paid-up additions the same way as mini-paid up life insurance policies stacked on top of your original participating whole life policy.

Paid-up means exactly that. Once it’s purchased, you never pay anything for it again. What each PUA does is accelerate your daily cash value growth as well as your total death benefit.

How Do You Select Paid-Up Additions?

For starters, Paid-Up Additions are a spec that exists in participating dividend paying whole life insurance. As mentioned above, they can be purchased with additional deposits of premium, dividends or a combination of both. When dividends are used to purchase PUA’s, there is no taxable event triggered.
You can decide to use dividends to purchase PUA’s or:

Receive dividends in cash
Use dividends to lower or offset your premium
Payback policy loans
Sit on deposit and earn interest

For the purposes of implementing the process of Becoming Your Own Banker, The Infinite Banking Concept, we elect to have dividends purchase paid up additions.

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Paid up additions vs enhanced

In most cases, participating dividend paying whole life policies feature a rider that allows you to purchase these paid-up additions. Different firms have different names. For instance, you’ll come across names such as:

Paid-Up Additions Rider (PUA/PUAR)
Addition Life Insurance Rider (AILIR)

Every earned dividend goes to acquire paid up additions.

What is its purpose of PUA?

Paid up additions are used mainly because they help to:

Increase the Total Death Benefit at no additional cost
Increase and accelerate the daily growth of Total Cash Value

The main reason why they are so popular is because they pay accumulate cash value daily and grow the death benefit simultaneously.

Compounded Interest

Albert Einstein is quoted as having said that “Compound interest is the eighth World Wonder.” We like to say that “Uninterrupted compounding is the ninth World Wonder”. And that is what you achieve inside the policy … daily uninterrupted growth.

As you may already know, compound interest results in exponential growth. Those who understand it, earn it. Those who don’t understand it, pay it.

Each paid-up addition increases cash value which consequently earns dividends in our (PUA) case. These dividends lead to additional paid-up additions, which end up earning dividends themselves. That’s a compounding factor that cannot be beat.