What exactly does it mean when a life insurance policy is considered “paid up”? Is anyone able to have a paid-up life insurance policy and how do you even know if your life insurance policy has a paid-up option? What exactly are some of the benefits of having paid-up life insurance? All of these are good questions to ask about a paid-up life insurance policy and are important in understanding when making financial decisions pertaining to your financial future. Below, we’re explaining everything you need to know about paid-up life insurance.

What is a Paid-Up Life Insurance Policy?

paid up life insuranceTo begin, it is important to be aware of what a paid-up life insurance policy is. Paid-up life insurance pertains to a life insurance policy that is paid in full, remains in force, and you no longer have to pay any premiums. While this sounds rather simple, it is actually a bit more complex. Paid-up life insurance is strictly an option only for whole life insurance policies.

A whole life insurance policy offers life insurance coverage for the whole life of the insured individual. Premiums are level and the death benefit is guaranteed as long as you continue to pay the policy premiums. In addition to whole life policies, they build up a tax-deferred cash value, which is basically savings, over the life of the policy. The cash value continues to grow in time with the premiums that you pay. If you surrender the policy earlier, you are then entitled to some of the cash value.

Another form of this would be a dividend-paying whole life insurance policy or a participating whole life insurance policy, in which your life insurance company will pay dividends to you. Dividends are a portion of the life insurance company’s profits that are paid to policyholders who, when they purchase life insurance, are investing in the growth of the life insurance company.

With paid-up life insurance, it comes in two forms:

  • Paid-Up Status – You are able to convert a whole life insurance policy to a paid-up policy, in which this will allow you to keep the policy in force without continuing to pay the premiums. This means that your family will receive a portion of your death benefits if you die, but you will not have to continue to pay the premiums.
  • Paid-Up Additions – Utilizing dividends that the policy earns to purchase additional coverage and grow additional cash value.

With your whole life insurance policy, you are able to convert it to paid-up status with ease.

How to Convert to Paid-Up Status

The majority of people purchase a whole life insurance policy with the best intentions, but over time the premiums can become rather difficult to pay, or the policy could not be an advantageous investment for much longer. With that being said, letting your policy lapse is never a good idea – especially after you have paid into it for several years and have accrued cash value. This is where you may be wondering if there is a way to keep your policy in force without continuing to pay premiums.

Fortunately, this may be an option for you, but only if your policy enables conversion to paid-up status. While this means that you do not have to pay any more premiums, technically you still have to pay to keep the policy in force. The paid-up life insurance policy enables you to keep your whole life insurance policy in force without continuing to pay premiums, but it is only an option if you have built up substantial cash value in your policy.

To simplify this, it basically means that your policy is kept in force by deducting the premiums from your cash-value account. While this means no more payments temporarily (or permanently), it also means that your death benefit decreases as well. If you were to pass away within the time period of your policy, then your family will still receive your death benefit, but only the amount that is left over after your premiums have been paid. Therefore if you choose to take the alternative route and surrender your policy or take out a loan, then this will also reduce the amount of funds available to you as well.

What Exactly are Paid-Up Additions

A paid-up addition is categorized as a miniature life insurance policy. The cash value is built up through the amount paid, in which if you pay $5, then you also accrue $5 in cash value. Paid-up additions also offer a death benefit and earn dividends/interest from the insurance company, which are then put into your cash value. These mini-policies are paid up, which means that they no longer require premiums or other costs. You will accumulate cash value over time and your family will receive the death benefit if you are to pass away. Overall, purchasing paid-up additions as an investment is an extremely financially sound decision for those that are seeking safe and tax-friendly growth.

Final Word on Paid-Up Life Insurance

Paid-up life insurance policies are policies that are paid in full, remain in force, and do not have any premiums owed. Paid-up life insurance is only an option, however, with whole life insurance policies. To convert your life insurance policy to paid-up status, please refer to your specific insurance policy or contact your life insurance agent.


  1. My grandmother had a policy me years ago. My mom said it was paid up whatever that mean. Just trying to find out about it. Thank you

    1. Hi Ann,

      A “paid up” policy means that all of the premiums have been paid. Assuming that you didn’t take a loan on the policy, you will never need to pay any more money towards the policy. It should cover you for your entire life, without any future payments.

  2. My wife and I purchased some/ several whole life policies paid up at 65, when I was in the Army. We have paid on them for years.. Now that Kathy and I just turned 65, I am thinking that the policies should be paid up. However, the company continues to take the money out of our checking. If the there are no more premiums to pay. What are they doing with the money? Is it going into the cash value? Is the death benefits what’s the face value of the policy? Lastly, what happens if we stop paying? Will they start taking money out of the cash value to keep the policies enforce? I know it’s a lot of questions, but I am confused… Thanks, Clinton

    1. Hi Clinton. Do you have any outstanding loans on the policy? The wording can be nuanced here and I don’t want to give you a wrong answer. It’s possible that at age 65 you have the option to convert your policy to be “paid-up”. Your continued premiums may be purchasing more paid-up insurance adding to your death benefit. You should contact your life insurance company directly since the policy history and exact contract terms here are important.

  3. If I cash in my Life insurance policy which Is all paid up, will I be taxed at source and then have to
    declare the amount on my income tax return. I am from Quebec. My policy is with London Life.

    Thank you

    1. Hi Nicole, We are a US-based company and do not offer tax advice so you will need to contact a tax professional. However, in general, life insurance gains are taxed at 15% in Canada.

  4. Hi my farther as n paidup life insurance i recently find it but my when he passed away the policy paid some for my mom but the policy mature date is in October do you think there is still money in the policy

    1. Hi Nicolene, if a death claim was filed and the policy paid out, it is unlikely that there is more money to be paid. You can contact your life insurance company to double-check that this is the case.

  5. My dad passed about 9 years ago. I just got a letter from The Hartford that they have a life insurance policy on him written by Lincoln National. I asked them who has been paying the premiums and was told that the policy is “paid up”. Its only a $500 policy but I never asked them if that is the value of the policy or if it has a higher cash value. I’m thinking Dad probably got it in the 1960’s. Upon death do whole life policies (if that is what it was) pay the cash value or just the face value of the policy?

    1. Whole life policies will pay the face amount of the contract upon death. The cash value would be paid if the policy was surrendered while the insured person was still alive.

  6. Hi I have a Variable Life Policy that I’ve paid into for 12 yr. and no longer have to make premium payments towards it.
    Face Amt Estimate: $57K(when I signed up)
    Today Death Benefit: $97K roughly
    Cash Value: $25K w/ no outstanding loan
    If I did a partial surrender up to the cost basis $14K. Would it cause the entire policy to change, including the Face Amt. Essentially it seems as though I would be issued a new policy without making premium payment.
    Face Amt Estimate: $23K / Death Benefit :36K / Cash value: 11K
    I thought a partial surrender amt would only deduct from the current death benefit value so & Cash Value. But what I was quoted seems to have restructures the entire policy which doesn’t seem to make sense.

    1. Hi Kathryn, what you are saying would be true, for a whole life insurance policy. Variable Life is much more complicated. I believe what has happened is your death benefit has been rising at a rate that passes what is called the “CVAT Test” with your cash value, or perhaps it is rising “in corridor” with your premiums paid in. These are features of variable policies that allow more premium to be paid into them and more cash value accumulation, without the policy turning into a modified endowment contract. The death benefit rises proportionally in order to maintain it’s status as a life insurance policy, as opposed to an investment account. Because it is more than a 1:1 factor of increase, when you withdraw money it is also reducing your death benefit more than $1 for every dollar withdrawn. The “face amount” should still be reduced dollar for dollar I believe, though I may be wrong. There are many factors here to consider. First of all, the cost of insurance will rise over time. Are you certain that you will never need to pay more premium into the policy. Secondly and more importantly, by withdrawing money you are giving up the potential for more compound growth in the death benefit. This sort of defeats the original purpose that you had for choosing this type of life insurance and funding it heavily in the early years as you did. Perhaps you should consider making a 1035 exchange into a paid-up whole life insurance policy. This is all fairly complex, and you need a lot of guidance to understand the best course of action. You should consult with an advisor for sure.

  7. My mom got a $500. Policy on me and paid it off. She has recently passed. The policy has been paid off for 30 years can I cash it in and if I did what is the cash value on it

    1. Hi Jimmy. We would have no way of knowing what the value is. If the ownership of the policy passed to you (it didn’t necessarily but it sounds like it may have), you can cash it in. Please contact your insurance company to determine the value and take ownership of the policy.

  8. I have a $5,000 whole Life policy that I have been paying on for 55 years.
    On my yearly payment due statement it shows “additional paid-up insurance” paid for by dividends. For this example let’s say the $10,000.
    Is the at death value of this policy $5,000 + $10,000 , or does the $10.000 “additional paid-up insurance” include the base $5,000?

    1. Larry great question! I don’t know. You should call your insurance company to ask. I believe it is in addition to your face amount, but without seeing the statement I can not be sure.

      1. Who sold this poor man a 5k life policy??? That won’t cover anything

        1. It could be used to pay final expenses, also known as a burial policy. In 2020, you are correct it probably would not even cover this but it will help with basic costs.

        2. He took the policy out 55 years ago. $5000 at that time was the equivalent of a good years wage. Don’t criticize unless you know all the facts.

  9. Mom passed away in 2013 age 93. Just found out she had a paid in full in 1955 policy for 500.00 or 550.00. There are three surviving sisters. Paperwork sent in and two checks were sent out. Mine was 268.00, another sisters was 468.00, third sister received nothing. Feel like we all got screwed by Transamerica for the amount after all these years. Did we? Should t it have been a lot more after 60 years.

    1. It’s not really a question of time. It sounds like it was always a small policy. Unfortunately, if the face amount was only $500, there isn’t much you can do. The question is why she had a life insurance policy with only $500 of coverage?

  10. Hi,

    My 80 year old father has a whole life policy with a 30,000 face that pays dividends. Over the years he has additional paid in insurance of 64,000. First, is there any reason to keep paying premiums? Second if he were to cancel the policy what would he receive back? Finally is the payout higher if he just keeps the policy till the end? Thanks.

    1. John you need to request an illustration from the life insurance company. It will show the current surrender value, death benefit, and projected value over time. My hunch is that you can change the dividend option to pay premiums, with the excess going to purchasing additional paid-up insurance and you will not need to pay another dollar into the policy. If the cash surrender value is near the $64,000 death benefit, maybe you want to surrender it now. You will need to see the numbers to know.

  11. In talking with my dad who is 73, he said he has a life insurance policy for 50,000. I did the math and he has paid over 60,000. He has been paying into it for over 50 years. Does that extra 10,00p increase his policy to 60,000 or has it been monies thrown away?

    1. It depends. If it is a whole life policy he probably has additional insurance. Check with your life insurance company to verify.

  12. On behalf of others, I want to say thank you so much for your insights and taking the time to answer questions others have asked.

  13. Hello Thomas. I just found out my 86 yr old grand father has policy that was sold to him on Jan 1, 1993 LPU90 face amount 5,000 and a monthly payment of 69.40 a month. Will the policy terminate once he turns 90 or will the policy be paid up? Also I did the math he has overpaid and has put in more money and has gone over the amount of coverage. How do I request the amount to view his cash surrender?

    1. Call the insurance company and request a cash surrender! Maybe his death benefit is more than $5,000, you should ask for an illustration.

  14. I won a sizable amount of money in the lottery. It was suggested that I start a whole life insurance policy for the amount that I wanted to leave for my children/grandchildren. If I wanted to leave them 100K each (there are 4) can I buy and pay the policy in full at the time of purchase? Should it be done in one policy or a separate one for each child/grandchild? I want to cover their futures, not turn them into rich brats.

    1. Hi Franki, Yes you can purchase a paid-up policy with a lump sum. You will not need to fund it with the total amount of the death benefit. So for instance, maybe you will pay $350,000 for a $400,000 death benefit. This is because the life insurance company will hold your money, and make interest off of it until you die. You do not need to purchase 4 separate policies. One is fine, you can name each grandchild as a 25% beneficiary. If you decide to, you can use dividend payments to purchase additional paid-up life insurance, so the death benefit will grow a bit more over time as you live longer. You could also use the dividend to pay yourself back some of the money you spent, it is your choice.

  15. My grandma has two life insurance policies that were taken out when she was 6 there 90 years old. Now and paid up we were told they draw interest she wants to cash them in thay were taken out in 1931.

    1. Up to her. You need professional advice given the intent and specific situation. A reason to keep them would be to avoid the estate when she dies. A reason to get them paid out now would be to get the money for other purposes. There is no one “right” answer. The correct answer for you depends upon your situation.

  16. Hi! What happens to a limited pay policy which has a paid up life dividend option once the premium is paid? Where do the dividends get applied once the policy premiums are paid up? Thanks!

    1. Dividends can be paid out as cash or used to purchase additional paid-up insurance in this case! They can also sit in an account and earn interest with the life insurance company.

  17. Hi Thomas, in responding to Franki (above) investing in an Fixed Indexed Annuity would also be a guaranteed lifetime income for the kids.

  18. I have a ‘ paid up’ insurance in which I made additional payments until I reached the age of 65. My insurance held my policy but lapse it after 20 years. I wasn’t aware of this for a full year.
    Do I have a leg to stand on?

    1. Something about this doesn’t make sense. If the policy was truly “paid-up”, no additional premiums are required to be paid to keep the policy in-force. You need to work with an agent from the company or the service department to understand exactly what happened and what your options may be. It is possible you can still reinstate the policy too.

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