Scheduled or Unscheduled Paid-Up Additions: Can You Add Money Whenever You Want?

A whole life premium has pieces. There's a base premium, there's often a slice of term insurance, and then there are paid-up additions, or PUAs. A paid-up addition is a small extra chunk of permanent insurance bought with cash, and it's where most of the cash value growth actually comes from in a high cash value design. The PUA rider explainer covers the mechanics.

What many people miss is that carriers handle the timing of PUA money in two different ways. With scheduled PUAs, you tell the carrier up front how much you'll pay and when. The carrier expects that payment on that date, usually around your policy anniversary. With unscheduled PUAs, you pay a small scheduled amount and then send extra whenever you have it, any time during the year.

Some carriers allow only the scheduled route. They want to know what you're giving them each year. Others allow the unscheduled route, and it works a lot like an indexed universal life policy, where you set a modest planned premium and then add up to the MEC limit whenever cash shows up. MEC stands for modified endowment contract, the point where a policy stops getting its normal tax treatment because it was funded too fast.

Who benefits from which? A salaried person who knows exactly what lands in the checking account each month can use scheduled PUAs without any trouble. A person paid on commission, a real estate agent, or a business owner whose income swings can run into trouble. In a big month there's plenty of cash. In a slow month there's almost none. For that person, a small scheduled premium with room to drop in large amounts later fits real life much better.

This is why flexibility ranks first when I compare carriers. A carrier that pays a slightly better dividend but only lets you put in a small amount can leave you with less cash value than a more flexible carrier where you can put in ten times as much. More dollars going in beats a slightly better rate on a small number of dollars. Dividends aren't guaranteed either way.

A viewer asked about this during a live stream, and I answered in a short video on scheduled and unscheduled PUAs.

Before you pick a carrier, write down your best guess at when your money arrives over a typical year. If it comes in lumps, ask each carrier one direct question: can I add PUA money outside the schedule, and how much of the year is that open?