Reduced Paid-Up Insurance Option
the lapsed policy's cash value is applied as a single premium to buy a paid-up policy of the same type as the lapsed policy. The paid-up death benefit is the amount that the cash value buys as a single premium at the insured's age. Returning to our example, if Ted elects the reduced paid-up option to apply his $12,000 in cash value, that amount will buy $28,000 of paid-up whole life coverage. The reduced coverage will apply for the length of Ted's life.