How is reduced paid up calculated?
Asked by: Coty Sipes V | Last update: December 20, 2025Score: 4.8/5 (14 votes)
What is the formula for reduced paid up insurance?
The reduced paid-up factor (RPU factor) is calculated by dividing the total number of premiums payable under the Child plan by the total number of premiums paid. The bonuses that are accumulated under the policy up to the date of the first unpaid premium will not be reduced.
How does reduced paid up work?
If you have a whole life insurance policy and no longer want to pay premiums, you may use your cash value to fund reduced paid-up insurance. This means that you can choose to stop paying premiums and your guaranteed death benefit would be the cash value, rather than the original agreed-upon coverage amount.
What is the formula for paid up value?
What is paid-up value? When policyholders decide to stop paying premiums but keep the policy active, it becomes a paid-up policy. The paid-up value is calculated as: Paid-up value = (Premiums Paid / Total Premiums Payable) × Sum Assured.
What is true about reduced paid-up insurance?
Reduced paid-up insurance would allow the death benefit to remain in place without you being required to pay any future premiums. However, the death benefit is reduced to the cash value that you had in your original life insurance policy.
Reduced Paid Up Option: A Great Way to Maximize the Value of Your Whole Life Insurance?
What happens to the cash value in a reduced paid-up policy?
Upon exercising the RPU option a policy's accrued cash value stays the same. However, the death benefit is reduced. Once a policy has been Reduce Paid-up (RPU) it may continue to accrue cash value over time. This cash value is still usable via policy loan similar to the original policy.
How to continue reduced paid up policy?
How to Continue Reduced paid-up policy? If you do not opt for the surrender value, the policy will continue on a reduced paid-up basis. You can continue enjoying reduced benefits of the Money-Back Plan without paying any future premiums.
How is the paid-up value calculator?
You pay annual premiums for the 10 years and stops paying premiums after that. In this case, the paid-up value would be: number of premiums paid (10)/number of premiums payable (20) X sum assured (1,00,000) = ₹50,000.
What are the disadvantages of a paid-up policy?
Reduced Coverage: You or your beneficiaries will not receive the policy's original coverage. This is the primary drawback of the paid-up policy.
Can you cash in a paid-up life insurance policy?
If your policy has built up a cash value, you can withdraw money or take a loan on the policy. If it has a cash surrender value, you can stop the policy and get the money built up in the cash value. However, there may be charges for surrendering early.
How do you calculate paid up?
What should policyholders consider before opting for reduced paid-up insurance?
However, it is crucial for you to carefully consider your financial situation, long-term goals, and the potential impact on beneficiaries before opting for reduced paid-up insurance. Speak with a financial advisor and your insurance agent so that you know you are making an informed decision.
What is the difference between extended term and reduced paid up?
The extended term insurance option differs from the reduced paid-up insurance option as it does not allow the policy to continue to earn interest, increase cash value, or pay dividends (if dividends are applicable). It does, however, allow the face amount of the policy to remain the same for a specified period of time.
What is a reduced paid up value?
Reduced paid-up insurance allows you to keep your policy in force even if you stop paying premiums. Instead of lapsing, your policy continues with a reduced sum assured, proportionate to the premiums already paid. This option can be handy when you can no longer afford the premium payments but still want coverage.
How to calculate insurance formula?
Premium = (Risk Factor * Sum Insured) / Coverage Period
In this formula: Risk Factor: Risk associated with the insured item or individual is usually expressed as a percentage. Sum Insured: the total amount of coverage required. Coverage Period: the duration for which the insurance coverage is valid.
What is the formula for RPU?
Revenue Per User (RPU) is calculated by dividing the total revenue by the total number of users.
How is paid up policy calculated?
Let's understand this with an example:
After 15 premium payments, he started facing financial difficulties and opted for paid-up benefits. The paid-up value will be estimated as: Paid-Up Value=50,00,000 x 15/30=25,00,000/-
Can I revive paid up policy?
Ans: The LIC policy revival process involves reinstating a lapsed policy by paying the outstanding premiums and any accumulated interest and fulfilling necessary requirements, such as a health declaration or medical examination.
Can I cash out paid-up additions?
You can cash out paid-up additions (PUAs) from a whole life insurance policy by withdrawing from the accumulated cash value or taking a loan against it.
What is the formula for reduced paid up?
Sum Assured under a Reduced Paid-Up Policy (RPU)
This is calculated by multiplying the Sum Assured with a RPU factor, which is simply the number of premiums paid vs number of premiums that were payable as per the policy schedule.
Can I surrender a paid-up policy?
On surrendering a paid-up life insurance, the policyholder will receive the special surrender value, which can be estimated by adding the paid-up value to the surrender value factor. When one stops paying premiums after a certain period, the policy continues but with a lower sum assured.
What is the principle of paid up value?
Paid-up value indicates that your policy has received enough premium input to cover you till the policy tenure runs out even if you make no additional premium payments on the policy. You can choose to surrender such a paid-up policy and end the benefits so as to withdraw the money from the policy.
Does reduced paid up insurance have cash value?
The reduced paid-up option is not available with term life insurance policies since those types of policies do not build any cash value. See which provider is right for you. The amount of coverage you need depends on many factors, including your age, income, mortgage and other debts and anticipated funeral expenses.
What is reduced paid up max life?
“Reduced Paid Up Sum Assured” means an amount equal to the Sum Assured multiplied by the resultant of the total Premiums received by Us less Extra Premium (if any) divided by total Premiums payable by You excluding Extra Premium (if any);
How do I convert to paid up policy?
If you do not close the policy but stop paying the premiums, your policy becomes “paid-up”. However, this is possible only after you have paid premiums for at least three years. The number of years will depend upon your policy terms. You can ascertain the exact number from your policy document.