What Is Reduced Paid-Up? Definition

Why it matters

Choosing it keeps lifetime coverage but at a lower face amount than before. It can help a retiree who can no longer afford premiums but wants some protection for final costs. The new amount is listed in the policy's table of values. Decide before the policy lapses, since the default may be different.

Source: naic.org

Related terms

Nonforfeiture Options: Nonforfeiture options are choices a permanent policy owner has if premiums stop. They let the owner keep some value, such as cash, reduced paid-up coverage, or extended term coverage.
Paid-Up Policy: A paid-up policy is a permanent life insurance policy where all required premiums have been paid. Coverage continues for life without any further premium payments by the owner.
Cash Value: Cash value is the savings part of a permanent life insurance policy. It grows over time at a rate set by the policy and can be borrowed against or withdrawn, subject to the contract terms.
Face Amount: The face amount is the dollar amount of coverage stated on the policy. It is the base death benefit the carrier agrees to pay, before any loans, riders, or reductions.
Lapse: A lapse happens when a life insurance policy ends because the owner did not pay the premium by the end of the grace period. Coverage stops unless the policy is reinstated.

All 241 terms

Why it matters

Talk to a licensed agent.