In the Reduced Paid-up Option, what does the policyowner receive?

In the Reduced Paid-up Option, the policyowner receives a paid-up policy for a reduced face amount of insurance. This option is available when a policyholder decides to stop paying premiums on a whole life insurance policy but wants to retain some form of insurance coverage without incurring any additional premiums.

When exercising this option, the cash value accumulated in the policy is used to purchase a new policy that is "paid-up," meaning no further premiums are required. However, since the policy is now based on the cash value already accumulated, the face amount of the new policy will be less than the original policy's face amount. Therefore, while the policyowner continues to have coverage, it is at a reduced level, reflecting the amount available from the accumulated cash value.

This works to the benefit of policyowners who may not wish to continue premium payments but still want to maintain some life insurance protection.