Paid-Up Additional Insurance in Australia (2025 Guide)

For many Australians, a standard life insurance policy is just the beginning. As the cost of living rises and financial planning becomes more sophisticated, paid-up additional insurance (PUA) is emerging as a savvy way to enhance life cover, build savings, and unlock unique tax advantages. But what exactly is paid-up additional insurance, and how can it fit into your wealth strategy in 2025?

What is Paid-Up Additional Insurance?

Paid-up additional insurance is a feature available on certain participating whole life insurance policies. It allows policyholders to purchase extra cover—called paid-up additions—using dividends or additional premiums. Unlike term life, these additions are permanent, accumulate cash value, and don’t require ongoing premium payments for the new cover once issued.

Here’s how the concept works:

• Dividends or extra payments buy small amounts of extra life cover, increasing both the death benefit and cash value.
• Each paid-up addition is fully paid for upfront—no future premium obligations for that extra cover.
• The cash value of paid-up additions grows tax-deferred and can be accessed through policy loans or withdrawals.

Why Paid-Up Additions Are Trending in 2025

The 2025 Australian insurance market is seeing renewed interest in PUA options, especially as policy dividends are rebounding after a period of low returns. With interest rates stabilising and insurers adjusting their portfolios, policyholders are looking for ways to make their life cover work harder. Here’s what’s driving the trend:

• Rising cost of living: Families want more cover without the hassle of medical checks or new underwriting.
• Flexible wealth building: PUAs offer a conservative, tax-effective way to grow savings within an insurance wrapper.
• Estate planning: Older Australians use PUAs to boost legacy amounts for beneficiaries, using existing policy structures.

Major Australian insurers like TAL, MLC, and AMP now offer more transparent illustrations and digital tools to help policyholders understand the value of PUAs, reflecting regulatory pushes for clearer consumer disclosures in 2025.

Benefits and Drawbacks of Paid-Up Additional Insurance

Like any financial product, paid-up additions aren’t for everyone. Here’s a balanced look at their key advantages and considerations:

• Pros:
  • Permanent increase in death benefit with no ongoing premium for the new cover
  • Accelerates cash value growth—can be borrowed against or withdrawn for emergencies
  • May offer preferential tax treatment, as growth is often tax-deferred within the policy
  • No new medical underwriting for additions, making it ideal for those whose health has changed
• Cons:
  • Only available on participating (dividend-paying) whole life policies—less common than term insurance in Australia
  • Dividends are not guaranteed and depend on insurer performance
  • Complexity—PUAs can make policies harder to understand and compare
  • Cash value growth is steady, but not as high as aggressive investments

Real-World Example (2025): Consider Sarah, a 45-year-old Sydney resident with a $500,000 whole life policy at AMP. In 2025, she receives a $2,000 dividend. Instead of taking the cash, she uses it to buy paid-up additions, increasing her death benefit by $7,500 and adding $1,800 to her cash value. Over a decade, these additions compound, providing her with greater protection and a buffer for unexpected expenses.

How to Maximise Paid-Up Additions in Your Policy

If you’re considering adding or activating the PUA option on your life insurance, here are some practical steps for Australians in 2025:

1. Review your current policy: Not all policies offer PUAs. Check with your insurer for eligibility and rules.
2. Assess dividend history: Look at your policy’s past dividend performance and your insurer’s 2025 projections.
3. Factor in your life stage: PUAs are most powerful when started early, but can be valuable for estate planning later in life.
4. Compare with other options: Balance PUAs against other strategies like term riders or investing excess cash outside your policy.
5. Track regulatory updates: In 2025, ASIC and APRA are enforcing stricter disclosure rules—make sure you understand all costs and benefits.

Some insurers now allow digital management of PUAs, letting you reinvest dividends or make extra payments online—another win for busy Aussies wanting control and transparency.

Conclusion

Paid-up additional insurance is a powerful but often overlooked way to boost life cover, build cash value, and keep your financial plans flexible. In the evolving 2025 Australian market, understanding your options and acting early can pay off, whether you’re growing your wealth or planning for your family’s future.