Glossary

Reduced paid-up insurance

A nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy so no more premiums are due.

Also called: reduced paid-up option, RPU

Reduced paid-up insurance is one of the nonforfeiture options built into whole life and some other permanent policies. If you stop paying premiums, you can use the policy's net cash surrender value as a single premium to buy a smaller policy of the same type that's fully paid up for life. It's an alternative to cashing out or switching to extended term insurance.

The new face amount depends on your cash value, your age and the policy's guaranteed rates, and the contract includes a table showing it. Hypothetically, a 60-year-old with a $250,000 whole life policy and $90,000 of cash value might be able to switch to about $150,000 of paid-up coverage. Any outstanding loan is subtracted first. The reduced policy keeps building cash value and, if it's participating, may still earn dividends.

The option suits owners who still want some permanent coverage, for final expenses or a legacy, but can't or don't want to keep paying. Electing it isn't a taxable event, because no cash changes hands, but once elected it usually can't be undone without reinstatement and new evidence of insurability. Compare it with surrendering, a 1035 exchange or keeping the full policy. See nonforfeiture options: reduced paid-up and extended term and the keep, surrender or sell your policy?.

Last reviewed October 4, 2026

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Related terms

Extended term insurance A nonforfeiture option that uses a lapsed policy's cash surrender value to buy term coverage for the full face amount for as long as the money lasts. Cash surrender value What a permanent policy pays the owner on cancellation: the accumulated savings minus surrender charges and any outstanding loans. Paid-up policy A permanent life policy that needs no more premiums yet stays in force for life, because past premiums or its cash value have fully funded it. Cash value The savings component that builds inside whole life, universal life and other permanent policies, which the owner can borrow against or withdraw. Lapse The end of coverage because a premium went unpaid past the grace period or, in universal life, because cash value could no longer cover the charges.

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Related insurers

Farm Bureau Insurance of Michigan (Farm Bureau Life) Lansing life insurer of the Michigan Farm Bureau family, founded in 1951 and selling term, whole life and fixed annuities through Michigan Farm Bureau agents. Indiana Farm Bureau Insurance Indianapolis Farm Bureau insurer whose life company, United Home Life, sells via Farm Bureau agents in Indiana and independent agents elsewhere.

Related tools

Keep, surrender or sell your policy? Compares cashing in a policy, selling it in a life settlement, and keeping it, using the return your beneficiaries earn on what you keep putting in.