If a policyholder stops paying premiums before surrendering a policy, how does it affect the equity built up in the policy?

When a policyholder stops paying premiums before surrendering the policy, the equity built up in the policy, often referred to as cash value or surrender value, is maintained. This means that even if the policyholder has ceased premium payments, any equity that has been accrued up to that point remains intact.

Typically, life insurance policies, especially whole life or universal life policies, accumulate a cash value over time based on the premiums paid. If the policyholder chooses to stop making payments, they still retain the right to access that cash value, although the policy may eventually lapse if not adequately managed.

In situations where the policy is not surrendered, the policyholder may have options such as withdrawing funds against the accrued equity or utilizing it to purchase reduced paid-up insurance, which can help maintain some level of coverage. Therefore, stopping premium payments does not equate to losing the equity; it simply impacts how the policyholder may use that equity moving forward.