What happens if you stop paying on a whole life insurance?

Answer 1

The answer depends upon when you stop paying premiums, and perhaps, why.

1. A whole life policy builds "cash value". In that sense, it has what may be considered a "savings account" built into it. As you pay premiums, part of them are applied to the cost of the insurance, and part go to build cash value.

2. At first, cash value builds slowly, but over the years it speeds up. This is especially true if the policy invests the "savings" part into a mutual fund; in times of good markets, the value can increase quite fast.

3. There may come a point where there is enough cash value built up that you no longer have to pay premiums. Instead, the cash value goes toward the premium payments. Keep in mind, that if this goes on for a very long time, the cash value may be exhausted and you will have to start paying premiums again.

4. Whole life policies also usually contain provisions by which they are deemed "fully paid" if premiums have been consistently made for a stated period of time--for example, 20 years.

5. Some policies have provisions called "disability waiver of premium". These provide that in the event of a total disability (as defined in the policy), payment of future premiums will be waived for as long as the disability continues. This is an additional benefit that is sometimes available in some policies issued by some (but not all) insurers. When it is available, an additional premium is charged.