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Paid-Up Additions (PUAs)
​Paid-Up Additions allow you to put extra dollars into a whole life policy to increase cash value and death benefit faster. These additions participate in guarantees and dividends, providing greater flexibility, liquidity, and long-term control.
MEC Limit (Modified Endowment Contract)
The MEC limit is an IRS rule that restricts how much money can be contributed to a life insurance policy in its early years. It exists to prevent policies from being used purely as tax shelters, ensuring life insurance remains primarily for protection while still offering tax-advantaged growth.
Why the MEC limit exists
In 1988, the IRS introduced the MEC rules to try and stop overfunding that turned life insurance into a short-term investment vehicle. Policies that exceed this limit lose certain tax advantages on loans and withdrawals, which is why proper structuring matters.
Paid-Up Additions must be structured within IRS MEC limits. Properly structured policy design maximizes cash value growth while preserving the tax advantages of policy loans and withdrawals.