What is the Paid-Up Value of a Life Insurance Policy?

A paid-up value is the value of your sum assured after you stop paying your premiums. The sum assured decided at the start of the policy is reduced if you do not pay all the premiums. This reduced sum assured is known as Paid-up Value.

What Happens if you don’t Pay your Premiums?

Your insurance policy continues only when you pay all your premiums regularly. There is a due date to pay each premium. There is a grace period that starts after your due date. This is the extra period that the insurer gives to you in case you forgot to pay your premium. The grace period is generally 15-30 days.

When you don’t pay even after the grace period, your policy ceases to exist.

When does your Policy Acquire Paid-Up Value?

For a life insurance policy to acquire paid-up value the following two conditions are necessary:

• The policy has been in force for at least 3 years, (5 years for ULIPs)
• The policy has an investment value

Thus, policies such as endowment and money-back plans, your policy converts into paid-up if you fail to pay premiums and your policy has completed at least 3 years.

In the case of ULIPs, the same period is of 5 years. That is, you have to pay premiums for at least 5 years so that your policy can have a paid-up value.

How is Paid-Up Value Calculated?

Your policy’s paid-up value is calculated based on the following formula.