Ace the 2025 IC Variable Life Licensing Exam – Insure Your Future with Confidence!

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What happens when a Variable Life Insurance policy lapses?

The cash value is automatically refunded

The death benefit is reduced to zero

When a Variable Life Insurance policy lapses, the death benefit is reduced to zero. This occurs because the policy relies on a combination of premiums paid and the cash value accumulated through investment returns. If the policyholder stops making premium payments and the cash value is insufficient to cover the cost of insurance or other policy charges, the policy can lapse. As a result, the coverage will cease, and the death benefit becomes void, meaning it will no longer pay out upon the insured's death.

It's important to note that while the policyholder may lose the coverage, they might not necessarily forfeit all accumulated cash value if there is any remaining. However, the lapse of coverage means there would be no death benefit payable if the insured passes away after the policy lapses. This is a critical aspect of understanding the implications of policy maintenance in variable life insurance.

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The policy is renewed with higher premiums

The policyholder loses all benefits

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