Paid Up Additions: Whole Life's Turbocharger

The Key Takeaways of PUAs - the TL;DR

- - PUAs are Whole Life’s accelerator, not the core engine (WL base policy).
  - PUAs are essentially just mini paid-up versions of the underlying base policy.
  - You may not care about how PUAs increase your death benefit, but that’s what boosts your guaranteed cash value’s growth as well as your cut of future dividend pools.
  - Term riders allow you to increase PUA premiums, but too much can backfire.
  - The quantity of PUA-to-Base premium matters, but not as much as their quality

PUAs are Whole Life’s Turbocharger, Not the Engine

Think about how a turbocharger enhances a car’s performance. The engine still does the work, but the turbo forces more air through the system, dramatically increasing acceleration, responsiveness, and overall performance of the underlying vehicle.

Paid-up additions work much the same way within Whole Life insurance. A base Whole Life policy will eventually reach a respectable cruising speed on its own; it just happens slowly.

The PUA rider is the component that forces more financial power through the system. It boosts cash value earlier, raises the long-term growth trajectory, and accelerates your Infinite Banking policy up to peak performance much faster.

Paid-Up Additions are what can transform an ordinary Whole Life policy into your own bank sooner, as well as a reliable retirement vehicle later.

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What Are Paid-Up Additions?

Paid-up Additions are mini single-premium Whole Life policies that can only be purchased as an add-on to a larger ordinary policy. They are purchased either by dividends or a PUA rider and then stacked onto the base Whole Life insurance policy, accelerating its overall performance for Infinite Banking and retirement planning.

How Do PUAs Work?

Through its single-premium structure, a Paid-Up Addition immediately boosts a Whole Life policy’s guaranteed cash value, its permanent death benefit, as well as its share of future dividend pools to be paid by the issuing insurance company.

Paid-up additional insurance works just like an ordinary Whole Life insurance policy. Each PUA has its own cash value and death benefit component. However, because it is fully paid up with a single premium, the cash value of a Paid-Up Addition reaches critical mass much sooner.

Just like any Whole Life policy, a PUA’s cash value must climb higher every single day so that it eventually equals the death benefit by age 121. See how the lion’s share of this guaranteed growth is realized by life expectancy.

Normally, this type of heavy funding into a relatively small amount of death benefit would cause an ordinary life policy to become a Modified Endowment Contract (MEC), revoking its favorable tax status. However, since PUAs are simply just miniature scale models of the larger Whole Life policy they’re stacked upon, MEC status isn’t triggered by the smaller single-premium additions.

Nelson Nash discusses threading the MEC needle in his book Becoming Your Own Banker: Unlock the Infinite Banking Concept, Chapter 12 – Designing the Entity:

“It is best to select a plan (the base policy)…and add a Paid-Up Additions Rider (PUA) to the plan. By varying the amount allocated to each portion, you can place the resultant policy at any point between the base policy and the MEC line. The whole idea is to “snuggle up to the MEC line”—but don’t cross it! – Nelson Nash **

(** John “Hutch” Hutchinson has no official affiliation or association with The Infinite Banking Concept®, The Infinite Banking Institute, Nelson Nash, nor his book “Becoming Your Own Banker: Unlock The Infinite Banking Concept.”)

Ordinary Whole Life policies often get a bad rap for taking 12-14 years to break even. Adding a Paid-Up Additions rider and funding it to the maximum can cut this breakeven period in half or sooner, since over 90-95% of your PUA premium goes straight to your Whole Life policy’s cash value.

This breakeven criticism is one of the most commonly misapplied arguments against Whole Life. See exactly why in our Criticisms of Infinite Banking article.

By doing so, you’re just stacking more and more layers onto your guaranteed death benefit, and raising the bar, so to speak, for how high your guaranteed cash value must climb. Paid-Up Additions create reverse gravity that continually pulls your cash value towards its death benefit on a guaranteed basis.

Even though this image above is not drawn to exact scale, it conceptually represents how, as you get older, your PUA premiums buy you fewer units of paid-up insurance. Even if you are no longer coming out of pocket with new premium dollars, your dividends will automatically do this when choosing the Paid-Up Additions dividend option.

How Much Do PUAs Cost?

There are simple and complex ways to approach the question of how much do Paid-Up Additions cost:

1. 1. One way is to look at the explicit PUA loads each Whole Life company charges
  2. Another is to see how much paid-up death benefit your PUA premium buys
  3. Yet another is to examine how much that PUA death benefit grows to

Let’s start with the easy part.

PUA Load Charges From Different Companies

Below is how much each Whole Life insurance company charges for their “PUA Load.” Since a Paid-Up Addition is like a miniature single-premium Whole Life policy, the death benefit you buy is bought with this one-time load charge.

Once the load is deducted from your PUA premium, then it’s all growth and gravy from there. Let’s not forget that you actually bought something for that load. You bought paid-up additional insurance.

How Much Paid-Up Additional Life Insurance Do You Get?

How much you get will depend on both how old you are and what health rating you got when you originally did underwriting. What’s nice is the fact that your original underwriting essentially locks in that health rating for all future Paid-Up Additions you’ll ever possibly purchase.

The younger you are, the more death benefit you’ll get, as you can see in our example below showing the same $10,000 of Paid-Up Additions premium for a Male with the 2nd best preferred rating ages:

- - 37-year-old
  - 47-year-old
  - 57-year-old

Did you notice that there’s hardly any difference between any of the ages for the amount that hits their cash value on day 1? In fact, if you look closely at the numbers above, you’ll see that the younger people have slightly less cash value. That’s because they have to have so much more death benefit to start out.

Similarly, some people think that they’ll be severely penalized if they don’t get the absolute best health rating, but this just isn’t the case. This table below shows our 47-year-old at:

- - Preferred Plus
  - Preferred
  - Standard

Basically, with any standard or better, we can effectively shrink wrap the death benefit around your cash value so that both grow optimally.

How Big Do Those Paid-Up Additions Grow To?

When purchasing paid up additional insurance, that extra cash value and death benefit you bought acts like buying additional shares of stock in the issuing mutual insurance company you become a part owner in by buying a participating Whole Life policy.

Adding PUAs entitle you to a bigger cut of any future dividend pools, which you can then roll immediately back into your policy to buy even more Paid-Up Additions, which entitle you to even more future dividends, which buy you more PUAs, and so on…

Nelson Nash hints at how this viciously good cycle I’m describing may have helped him in naming his book Becoming Your Own Banker: Unlock the Infinite Banking Concept (again from Chapter 12 – Designing the Entity):

“The base policy will pay dividends, and the PUA rider will also pay dividends. These should be used to buy Additional Paid-Up Insurance, which gives more meaning to the infinite qualities of the system.” – Nelson Nash **

Let’s fast-forward those same $10,000 PUA premiums we looked at in the table above to see what they grow to (if dividend rates stay absolutely flat from here on out).

It’s worth disclosing that Whole Life dividends aren’t guaranteed, and they that will fluctuate over time.

However, the oldest “True Mutual” companies have paid a dividend every year for over 150 years through depressions, recessions, inflation, stagflation, and world wars. Heck, one company even paid out dividends to policyholders during the Civil War!

When new clients come to us, we can illustrate and stress-test what happens if dividend rates go down, but unfortunately, what we can’t show is what happens if dividend rates instead rise in the future due to increasing inflation, like we’re feeling now at the gas pumps and inside Costco.

However, check out our review of the illustrated vs actual year by year dividends of an old Mass Mutual 10-pay policy sold in 1980 performed. It’s incredible, especially when compared to the double-digit high-yield savings rates banks were paying back then.

Adding a Term Insurance Rider to Increase PUAs

The purpose of blending a term insurance rider onto your Whole Life policy is to raise that “MEC line” by substantially increasing the death benefit, but for a fraction of the cost of adding more base Whole Life.

If Paid-Up Additions are the turbocharger, then a term rider is like an ultra-lightweight titanium chassis to stack more turbochargers on. This capacity to force such a disproportionate amount of PUAs into a policy so early, is what can get a Whole Life policy to peak performance in 4-6 years vs. the normal 12-14 with an ordinary policy.

However, adding term riders can sometimes be a polarizing subject among Infinite Banking agents, with shenanigans at both sides of the spectrum.

Some Infinite Banking Purists Won’t Use Term Riders

Certain Infinite Banking purists don’t like adding term riders to their Whole Life policy designs. Is it because doing so could dilute their commissions since the base policy makes up most of the agent’s comp when selling an Infinite Banking policy?

Take a look at these 3 different levels of possible premium payments that are possible depending on the riders used:

$6,494 = Base Policy Only
$16,667 = Base Policy + PUA Rider
$50,000 = Base Policy + Term Rider + PUA Rider

It’s possible, perhaps, that the resistance to using a term rider on Whole Life is because it’s built exactly the same way Universal Life’s cheap-but-increasing fee structure is.

Infinite Banking purists have long since hated anything related to UL, starting with what Nelson Nash had to say about it in Becoming Your Own Banker: Unlock the Infinite Banking Concept:

“When I first saw the policy, I ran some illustrations, and they kept falling apart when the insured attained age 65 to 70. The cost of one-year term became prohibitive at the advanced ages and ate up the cash fund from that point forward.” – Nelson Nash**

Keep in mind that Universal Life’s entire cost structure is made up of this adjustable-rate term structure, whereas with guaranteed Whole Life as your core foundation, the term insurance is simply a temporary stop-gap that will either:

1. 1. Get absorbed or converted out once you make adequate additional paid up insurance payments
  2. Or be manually removed sometime after the 7th year if you can’t sufficiently fund your PUA rider.

Remember how even Nelson observed that an underfunded UL didn’t start breaking down until age 65-70. That’s when the fees start increasing exponentially and cannibalize your cash value.

In the meantime, a temporary term rider can often increase your Infinite Banking policy’s death benefit by 3x to 5x to protect your family, while simultaneously giving you that extra capacity and flexibility to stuff it with a disproportionate amount of Paid-Up Additions as cash flow comes in.

When Term Riders Get Overplayed & Overused

Other Infinite Banking agents claim you should only buy Whole Life from companies that allow you to whittle the base policy way down and slap on massive term riders. In these structures, hardly any of your premium goes to the Whole Life base policy.

However, when you put these types of policies under the microscope, you find that their early cash values may be initially attractive, but that their mid-term performance starts lagging, and their long-term cash value gets left in the dust of the top 2 performing mutual companies that don’t allow you to blend in as much term & PUAs.

You can see a full breakdown in our annual Whole Life update.

This brings us to one of the biggest myths about Paid-Up Additions: that quantity matters more than quality.

What Is PUA Surrender Value?

When you surrender PUAs, you’re simply cashing out the accumulated cash value of your paid-up additional insurance. Unlike surrendering your entire policy, you can surrender just your Paid-Up Additions while keeping your base Whole Life policy intact.

The PUA surrender value is the cash value portion of your paid-up additions at the time you cash them out. Since PUAs have no surrender charges or penalties after the initial load is taken, what you see is what you get – your full accumulated cash value.

This is one reason why PUAs are so attractive for Infinite Banking. When you need to access funds, you have two options:

- - Take a policy loan using your PUAs as collateral, keeping them growing while you use the money elsewhere.
  - Surrender some PUAs outright for their cash value, permanently removing them from your policy.

Most Infinite Bankers prefer policy loans, since your PUA death benefit and dividends keep compounding even while you borrow against them. However, surrendering PUAs can make sense if you want to reduce your overall death benefit or simply prefer to own the cash outright without any loan interest accruing.

Just remember: once you surrender a Paid-Up Addition, that chunk of additional paid-up insurance is gone along with its future growth and dividend participation. You’re essentially selling back your shares in the mutual company’s dividend pool.

PUA Quality vs. PUA Quantity (10/90 Whole Life)

So many Infinite Banking influencers are pushing the urgency to “get your money working for you.” This has led to a trend of many banking agents choosing lackluster-performing policies that prioritize the quantity of PUA over its quality.

It’s now commonplace for agents and consumers alike to refer to policy designs by the ratio of Base-To-PUA, like a 10/90 policy or a 40/60, and so on. Furthermore, certain riders even allow for massive front-loaded single-premium dump-ins to accommodate this urgency. It sounds great in theory until you do compare the math and discover significant underperformance in the long haul.

Perhaps this fascination some banking agents have for 10/90 policies or single-premium dump in riders has to do with another one of Nelson’s quote from Becoming Your Own Banker: Unlock the Infinite Banking Concept, again from Chapter 12 – Designing the Entity:

“In describing this design of a policy, some people have called the process of putting a Paid-Up Additions rider on an ordinary life policy ‘overfunding’ the policy. Maybe that can help in the overall understanding, but the objective should be simply to get as much money as possible into a policy with the least amount of insurance instead of trying to put as little money in and provide the greatest amount of insurance (initially).” – Nelson Nash**

On the surface, Nelson’s claim here seems to make sense, since Whole Life’s base policy is where the bulk of the commissions live.

Although I see eye to eye with him on much of his early work, I have to push back and respectfully disagree with him here.

Once I really dove into the numbers and tirelessly unpacked these products from all the different companies, did I fully understand that:

- - PUAs are really just scale models of the underlying base policy
  - The Whole Life base policy is the main long-term determinant of enduring performance

In fact, I did an entire video breaking down how to analyze the hidden costs inside Whole Life’s black box and how to conduct a true cost/benefit analysis to see if it will be worth it for you.

Once you see the numbers side-by-side, it becomes clear that it’s less about avoiding cost and more about getting value for the expenditure…more cash value, that is, lots more.

In his book, Nelson basically states that you’re going into the banking business, per se, and even uses the age-old analogy that location, location, location matters greatly. If so, then what’s more important, the cost of setting up that business, or the bottom line once the business has conducted profitable affairs?

With everything else in life, you know that quality matters more than quantity, and that increasing the volume of an inferior ingredient usually doesn’t beat the optimal amount of a superior ingredient. The same is true for Paid-Up Additions and Whole Life insurance in general.

2026 Competitive Analysis on Top-Performing PUAs

Here, we isolated the performance of a $10,000 PUA payment for a 47-year-old Male at Preferred (the 2nd-best rating) for:

- - Guardian Life
  - Mass Mutual
  - and Penn Mutual.

Keep in mind, this is just an isolated Paid-Up Addition payment that would stack on top of the base policy.

These performance numbers also assume that future dividends earned from this $10,000 PUA premium will be the same as they are today (which they obviously won’t), and that they will all get rolled back into the policy to buy even more Paid-Up Additions (which they should):

First off, we know dividend performance will vary, but look at how higher dividend rates don’t necessarily equate to the total returns of these Paid-Up Additions. I dispel this myth thoroughly in my Whole Life Dividends Explained article.

Second, it’s also interesting to see what kind of immediate death benefit your PUA rider buys and its effect on long-term performance. In fact, do you see how by the 20th year, the cash value equals what that death benefit started at?

Lastly, you can see how different premium loads don’t move the needle that much when it comes to overall performance of the Paid-Up Addition. This is evident with Penn Mutual specifically, where they charge a 10% premium load for your first year’s PUA premium, and then 6% for every PUA thereafter.

Again, this is just isolating the Paid-Up Additions, and not the total return of how and how much they can be stacked onto the underlying base policy. To see a competitive analysis with your own true-to-life premium numbers, you can book a free consult with our policy design specialists here.

Hutch’s Final Take on Paid-Up Additions

Cracking the PUA code by optimizing for quality first and quantity second could turn out to be the biggest determinant of your banking policy’s success.

Here’s my six-step design process I used when designing my own family banking policies:

1. 1. Find the top-performing Whole Life policies for age/health
  2. Solve for “sufficient” early cash value with “maximum” long-term growth
  3. Determine the bare minimum premium I can pay each year, no matter what
  4. Forecast the maximum probable premium I can pay each year going forward
  5. Either solve so the base premium = minimum I can pay, then add max term+PUA
  6. Or design a policy to fit the maximum I can pay by blending the maximum amount of term+PUA around the minimum allowable base to see if this is feasible for my minimum.

Notice how I started with quality, and then we back into quantity, not the other way around?

Notice how I optimize around my likely cash flow?

When doing so, you’ll often find that by choosing the highest quality PUAs, you’ll have sufficient early cash value where you won’t have to alter any of your short or mid-term goals. And over time you’ll end up with a much bigger banking policy and retirement buffer as a result.

Book a call with one of our policy-design experts to get your cash flow custom fitted for a PUA-heavy policy using the finest materials. See the top 2 performers modeled and stress-tested to meet your needs