Insurance Broker Discusses Paid Up Additions Rider
As a proficient Insurance Broker, I get questions all the time from clients regarding a paid up additions rider. A paid up additions rider is actually a way to prepay premiums into an insurance contract. When you put this extra money into the paid up rider, the lump sum you add is part of the guaranteed cash value. There will be some fees taken out of it, but they do not charge commissions or monthly mortality charges on these. For the most part, this money will go into that side account. If you put in $25,000, then there will be a death benefit for the $25,000 you put into the paid up rider. That will be added to the policy’s original death benefit. The reason one would want to do this is it’s a way to get that money inside an insurance policy which may give you some protection from creditors and will definitely give you a return on your money. We don’t know the amount, but it will give you a return that is very competitive to taxable accounts.
It will also provide more additional death benefits. It may have a rider if you’re disabled that they will continue to put the money in. You are able to take that money out on a tax advantage, both the money you put in because it was an after tax contribution, and you can borrow or loan against the death benefit and that can come out tax free. You have to be very careful with that and make sure that you always have a policy. The only trick is that in order for that to work you have to have at least some death benefit at your death. This is because then a net death benefit is paid and that loan money is forgiven.
If you have questions about paid up additions rider, contact our professional Insurance Broker for guidance. Let our knowledge work for you.
This educational blog was brought to you by Insurance Broker Michael J. Bruno, seasoned Chartered Financial Consultant, Chartered Life Underwriter and Registered Health Underwriter. Specializing in financial planning and disability insurance for physicians and dentists for over 30 years.