What is the Difference Between a “Paid Up” Life Insurance Policy and a “Matured” Policy?

A policy that is “paid-up” requires no further premium payments to keep the policy’s full face amount of coverage in force for the remaining term of the contract (generally to age one hundred). This results when premium payments have been sufficiently large to build the reserve necessary to support the policy for the remaining term. However, the reserve, which is closely tied to the cash surrender value of the policy, will always be less than the face value of the policy until the end of the term of the contract. At the time when the reserve equals the face value of the contract, the policy has “matured.” In other words, the face value (death benefit) and the cash value of a matured policy are equal (or nearly so). In a paid-up policy, the cash value is less than the face value until the end of the term of the contract when it matures.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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