paid-up policy

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An endowment assurance policy in which the assured has decided to stop paying premiums before the end of the policy term. This results in a surrender value, which instead of being returned in cash to the assured is used to purchase a single-premium whole (of) life policy. In this way the life assurance protection continues (for a reduced amount), while the policyholder is relieved of the need to pay further premiums. If the original policy was a with-profits policy, the bonuses paid up to the time the premiums ceased would be included in the surrender value. If it is a unit-linked policy, capital units actually allocated would be allowed to appreciate to the end of the term.

Subjects: Financial Institutions and Services.

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