What happens to the life insurance protection if the insured discontinues premium payments on a policy with cash value?

When an insured discontinues premium payments on a life insurance policy that has accumulated cash value, the correct outcome is that protection continues until the cash value is exhausted. This is due to the way many permanent life insurance policies, like whole life or universal life, are structured.

In policies with cash value, the cash accumulation can be utilized to cover ongoing costs associated with maintaining the policy, including the cost of insurance itself. If the policyholder stops making premium payments, the insurer will use the cash value to pay the necessary costs, allowing the policy to remain in force temporarily. However, once the cash value is depleted, the coverage will end unless further premiums are resumed or the policyholder takes other actions.

This mechanism is significant because it provides a safety net for policyholders who may experience temporary financial difficulties, ensuring they do not immediately lose their life insurance protection.