What happens if a policyholder stops paying premiums on a VUL policy?

When a policyholder stops paying premiums on a Variable Universal Life (VUL) policy, the typical consequence is that the policy may lapse or be reduced to paid-up status. This occurs because a VUL policy is designed with flexible premiums and an accumulated cash value that can be used to cover costs such as the monthly cost of insurance.

If premiums are not paid, the policy may draw from the cash value to cover costs for a limited time. However, once the cash value is depleted and there are no premiums paid, the policy may lapse, which means the death benefit and coverage would cease. Alternatively, the policy could be reduced to a paid-up status, where the insurance remains in effect without any further premium payments, but this generally results in lower coverage.

Understanding this process emphasizes the importance of managing premium payments and cash value to maintain coverage in a VUL policy.