The Concept of Paid up Value of Life Insurance
Paid-up Value is the reduced amount of sum assured paid by the Insurer, in case the insured individual discontinues the payment of life insurance premiums due to some certain reasons. This specific rule paid up value is applicable only when the insured person has paid the premiums in full for the first three years consecutively.
If at least three full years' premiums have been paid in respect of this policy, any subsequent premium be not duly paid, this policy shall not be wholly void, but the sum assured by it shall be reduced to such a sum, called the paid-up value. This life insurance shall bear the same ratio to the full sum assured as the number of premiums actually paid shall bear to the total number of premiums originally stipulated in the policy.
The policy so reduced shall thereafter be free from all liability for payment of the within mentioned premium, but shall not be entitled to receive any kind of the future bonuses. The existing vested reversionary bonuses, if any, will remain attached to the reduced sum assured of paid-up life insurance policy.
The sum assured so reduced along with existing bonuses, if any, shall be paid in one single installment on maturity or on earlier death. If 6 out of the originally stipulated 30 premiums are paid, the sum assured under a paid-up policy would still be 20 percent of the original sum assured by the policy.
In order to keep it simple, paid up value is the amount that
you've paid in to the policy after reducing fees and surrender value is the
amount you can have back. Usually the longer you wait the higher the surrender
value becomes in relation to the paid up value. Your company will have
specifics on this rule.
