In Universal Life Insurance, what happens if a policyholder stops paying premiums?

In Universal Life Insurance, if a policyholder stops paying premiums, the policy can remain in force as long as there are sufficient funds in the investment account to cover the cost of insurance and any associated fees. This is a key feature of Universal Life Insurance that distinguishes it from more traditional forms of life insurance where premiums must be paid in full and on time to maintain coverage.

The investment component allows policyholders to accumulate cash value, and if the cash value is sufficient, it can be used to continue the life insurance coverage even in the absence of premium payments. This flexibility can be particularly beneficial during financial hardships, as the policyholder does not immediately lose their life insurance coverage due to missed premium payments, provided there are adequate funds in the investment account.

Thus, the correct answer reflects the unique structure of Universal Life Insurance, where the policy can remain active leveraging the cash value built up in the account.