What is a premium holiday in a VUL policy?

A premium holiday in a Variable Universal Life (VUL) policy refers to a period during which the policyholder can temporarily stop paying premiums because the policy has accumulated sufficient cash value to cover the costs associated with maintaining the policy. This feature allows policyholders some flexibility, particularly during financial hardships or unexpected changes in their financial situation.

The cash value in a VUL policy grows over time and can be used to pay for premiums, which means if the cash value is adequate, the policy can remain in force even if premiums are not actively paid. This can provide peace of mind and coverage continuity without the immediate pressure to make premium payments.

The other options pertain to situations that do not accurately describe the nature of a premium holiday. Increasing premiums or mandatory payments does not align with the idea of a premium holiday, which focuses on a temporary cessation of payments. A promotion for new clients also does not relate to the established policy benefits and flexibility provided within the terms of existing VUL policies.