When a whole life policyholder stops paying, the built-up cash value isn't lost; see the coverage each non-forfeiture choice buys.
Stop paying: three non-forfeiture choices
Take the cash (CSV)
—
coverage ends
Reduced paid-up
—
for life
Extended term
—
full coverage, limited time
…or keep the policy in force instead of lapsing
APL covers
—
missed premiums before the loan exhausts the CSV
Max policy loan
—
up to 90% of CSV; reduces the death benefit
How this works. A whole life policy builds a cash surrender value (CSV), so if you
stop paying you don't walk away with nothing. You can take the CSV in cash (coverage ends),
use it as a single premium for a smaller amount of reduced paid-up insurance that lasts for life,
or buy extended term: the same original coverage, but only for as long as the CSV can fund it.
Instead of lapsing, an automatic premium loan (APL) can quietly cover missed premiums, or you can
borrow up to 90% of the CSV as a policy loan. Non-forfeiture benefits are tiny in the early years
and grow the longer the policy is in force. Figures are illustrative.
Educational illustration of standard Canadian insurance concepts. Figures are illustrative, not an insurer’s rates.
Illustration only, not a quote or advice. Figures are simplified for education and do not
reflect any specific insurer's rates. Consult a licensed advisor.