If the encashment value of a unit-linked whole of life policy becomes zero, what can the life company do?

When the encashment value of a unit-linked whole of life policy reaches zero, it signifies that the policy has either incurred significant losses or has not accumulated sufficient value to sustain itself. In such a scenario, the life insurance company has a few options to manage the policy effectively.

First, the company may choose to terminate the policy. This is a straightforward action where the insurer ends the contract due to the lack of value, which means the policyholder would no longer have any coverage or benefits under that policy.

Secondly, the insurer could recommend an increased premium. Since the encashment value is zero, the insurance company might suggest that the policyholder increases their premium payments to replenish the account and restore some value to the policy. This would ensure ongoing coverage and potentially rebuild the policy's cash value.

Lastly, reducing the cover is another possibility. The insurance company can offer to adjust the policy terms by lowering the coverage amount to a level that can be maintained under the current financial conditions, which could help keep the policy active.

By selecting "All of the above," it reflects a comprehensive understanding that the insurance company has multiple avenues available when faced with a situation where the encashment value is zero. Each option serves a purpose in allowing the policyholder