Paid-up additions
The compounding engine inside a participating policy.
Small chunks of fully paid-up insurance you can buy with policy dividends, increasing both your coverage and your cash value.
How paid-up additions work
Paid-up additions (PUAs) are one of the ways you can use dividends from a participating whole life policy. Rather than taking the dividend in cash, you use it to purchase a small amount of additional, fully paid-up insurance — coverage that requires no further premiums. Each addition increases your death benefit and adds its own cash value.
Because those additions can themselves earn dividends in future years, PUAs create a compounding effect: coverage and cash value can grow over time without new out-of-pocket premiums and without new underwriting. This is why PUAs are a favoured option for people using participating whole life as a long-horizon accumulation tool.
The catch
The compounding only works to the extent dividends are actually paid, and dividends are never guaranteed. If the dividend scale falls, so does the pace at which paid-up additions accumulate. Projections that assume decades of steady PUA growth are scenarios built on the current scale, not promises.
There can also be tax considerations when you later access the enhanced cash value, since amounts above the policy's adjusted cost basis can be taxable. As with any cash value strategy, confirm the tax treatment with a licensed advisor before relying on projected PUA growth in your planning.
Common questions
Are paid-up additions worth choosing over taking dividends in cash?
If your goal is long-term growth of coverage and cash value, PUAs are attractive because they compound without new premiums or underwriting. If you need current cash flow, taking dividends in cash may suit you better. The right choice depends on your objective and, since dividends aren't guaranteed, on realistic expectations.
Do paid-up additions require more medical underwriting?
No — that's part of their appeal. Because they're purchased with dividends within an existing policy, they add coverage without a new application or medical exam. The trade-off is that the amount you can add depends on dividends being paid, which isn't guaranteed.