Do you know the paid-up insurance value of your policy?

This option is available with some types of life insurance that include a cash surrender value, such as “whole life” policies. After a certain number of years, you can ask your insurer to end your premium payments.  

At that point, the insurer will take into account the cash surrender value accumulated in your policy as well as your age to determine the amount of insurance that could now be provided without any more premium payments. This amount, known as the paid-up insurance value, will be lower than your initial coverage, which is why the resulting policy is known as reduced paid-up insurance. 

This approach may be useful if your initial level of coverage is no longer necessary or if you are at a point in your life when you simply need to free up some cash. You can do so without losing the peace of mind that comes from knowing that your loved ones will be receiving an insurance benefit in the event of your death. Be aware, however, that any riders attached to your original insurance policy will likely be cancelled, such as those providing accident or disability benefits, for example.  

So it’s an attractive option, but one you need to evaluate carefully with support from your advisor.