What happens to the cash value in a VUL policy if the policyholder stops making premium payments?

In a Variable Universal Life (VUL) policy, if the policyholder stops making premium payments, the cash value that has accumulated will be utilized to cover the cost of insurance. This cost is necessary to keep the policy in force, and if the cash value is not sufficient to cover these costs, it may eventually be depleted.

This mechanism is crucial because it reflects the flexible nature of VUL policies, where the policyholder has the option to adjust premium payments and death benefits. However, it also means that the sustainability of the policy depends on maintaining sufficient cash value. As the cost of insurance is deducted from the cash value, there is a risk of the cash value diminishing over time, particularly if the policyholder stops making payments and the cash value is insufficient to cover ongoing costs. If the cash value is exhausted and there are no further premium payments, the policy will lapse.

This understanding of how cash value functions in relation to premium payments highlights the importance of maintaining contributions to ensure the longevity of the policy and the benefits it provides.