CHAPTER 21 - Capital Redemption Policies: The Paid-up Sum Assured

Abstract

This chapter elaborates the capital redemption policies and the paid-up sum assured. The paid-up sum assured, or the paid-up policy value, can be defined as that portion of the sum assured that is already secured by the premiums actually paid to date. It is found that if no more premiums are paid after the fifth under a 20-year-term capital redemption policy, the policyholder will not receive the full sum assured at the maturity date and he will instead receive a reduced sum, and this is called the paid-up sum assured. One way of calculating it would be to write down the accumulated value at the maturity date of each premium that was actually paid and add them up. A much easier method, that one know how to calculate the policy value after 5 years premiums have been paid, would be to apply the concept of shifting the policy value forward from the end of the fifth year, through the unexpired 15 years, to the maturity date.