Paid-up additions in a participating policy increase which of the following?

• A. Increase cash value
• B. Increase death benefit
• C. Increase both cash value and death benefit
• D. Do not affect the policy

Answer: (C)

Paid-up additions are dividends used in a participating policy to purchase small, fully paid-up life insurance inside the policy. Each addition brings its own cash value and increases the death benefit by the amount of the addition. Because these additions are paid up with a single premium funded by dividends, they require no ongoing premium, but they enlarge both the cash value and the death benefit. Over time, the cash value of these additions grows, and the overall death benefit remains higher because it includes the value of all PUAs. This is why paid-up additions increase both cash value and death benefit.