Understanding Paid-Up Amount Of A Life Insurance Policy

IndiaFirst Life
• 06 May, 2025

What is the Paid-Up Value of a Life Insurance Policy?

The paid-up amount of a life insurance policy refers to the sum assured of the plan when the policyholder stops paying the premiums. Sometimes, life circumstances may change such that you may find it difficult to continue paying premiums. In such a case, the policy can be converted to a paid-up status. This allows you to continue enjoying a reduced life cover without having to pay further premium payments.

Let’s learn more about the paid-up amount of a life insurance policy.

What Does a Paid-up Policy Mean?

A life insurance policy becomes ‘paid-up’ when the policyholder decides to stop paying premiums after a certain period. As per recent regulations, if the policyholder stops paying the premium amount after they have paid the life insurance premium for at least a year, the policy turns into a paid-up one. The policy then continues with a reduced sum assured, known as the paid-up value.

With most insurers, a policy can acquire paid-up value only if the policy has been in force for a year, and if it has an investment value. So, endowment policies, money-back plans, or a ULIP (Unit-Linked Insurance Plan) may be eligible given the first condition is also met.

However, if the policyholder buys a life insurance plan but does not pay the premium for the 1^st year and discontinues to pay future premiums, it will be considered a lapsed policy. Such a policy will not offer any coverage.

How to Calculate the Paid-up Value?

This paid-up value is calculated based on the following formula:

Sum assured x (Number of premiums paid / Total number of premiums payable)

So, let’s assume Seher chooses to buy a life insurance plan for whom she has to pay premiums for 15 years. The sum assured of the plan is ₹50 lakhs. However, Seher is able to pay premiums only for the first 5 years.

As per the aforementioned formula, the paid-up amount of the life insurance policy in this case will be:

50,00,000 x (5/15) = 16,66,670

Converting to a paid-up policy is a good option for policyholders unable to continue paying their life insurance premiums. Instead of losing all benefits, the policyholder retains some coverage. This ensures that their loved ones continue to have a safety net.

However, before deciding, it is advisable to consult with your chosen life insurance company in India. In addition, remember to use a life insurance calculator to get premium estimates and make well-informed decisions beforehand.

by IndiaFirst Life
Headquartered in Mumbai, IndiaFirst Life Insurance Company Limited (IndiaFirst Life), with a paid-up share capital of INR 754.37 crore, is one of the fastest growing private life insurers in India in terms of New Business IRP in Fiscal 2023. Our key differentiators are our simple, easy-to-understand products that are optimally priced. As of Sept 30, 2023, we offered 30 retail products, 13 group products along with six riders (across retail and group portfolios), along with policies under the PMJJBY scheme, catering to protection, savings, health and retirement needs of our customers, leveraging multiple distribution capabilities and augmenting various investment options. In all propositions under the categories of Participating Plans, Non-Participating Savings Plans, Non-Participating Protection Plans, Unit Linked Insurance Plans, Group Protection Plans, Corporate Funds Plans, Riders & PMJJBY form a complete suite of offerings that help our customers prepare for the certainties of life. Our products are easy to understand and optimally priced with a developed comprehensive risk management framework/policy.