How to Calculate Paid-up Life Insurance Amounts

Paid-up insurance complicates, but adds value to, life coverage.

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Life insurance has two basic options: term and whole life. Term policies work like other kinds of insurance. You pay premiums and the company pays out only if you die. Whole life insurance includes a death benefit, but also has an investment value that increases with time. If you have a whole life policy, the paid-up amount can be an important part of your financial planning. Finding out what it is at any given time is relatively simple.

Paid-up Basics

A paid-up life insurance policy doesn't require regular premium payments. Instead, it pays out a death benefit based on a single, lump-sum purchase price. Typically, these policies increase in value as the policy ages and the value in the account earns interest. A paid-up value can be a separate policy, or attached to another whole life product.

The Easy Way

If you haven't borrowed against the value of your paid-up policy, you can find out its current value by looking at your policy paperwork. The insurance binder should include an amortization chart that tells you what your policy is worth in any given month. Depending on the details of the policy, this may or may not be the same as the policy's face value.

The Hard Way

If you have borrowed against the paid-up amount, that loan will alter the value proportionate to the amount of the loan. Look up the normal value in your policy paperwork, then subtract the amount you borrowed. Subtract from that the total of any fees your insurance company charges for taking out a policy loan. The customer service department or your personal agent can help you find out what those come to. You may also be able to find the current value listed on your most recent policy statement.

Dividend and Limited Pay Whole Life

Both of these insurance products are sometimes sold as paid-up life because they function in much the same way. The process for calculating their current value is similar to a normal paid-up policy, but more complex as it includes indexing to current markets, tracking previous dividends and changing fee structures over the course of the policy. Because of their variable nature, few policy binders have an amortization chart like simpler whole life products. It's best to consult with your agent or customer service representative for this kind of policy. They have access to the tools and information it takes to calculate a policy's present value quickly and accurately.