What Is Nonforfeiture Options? Definition

Why it matters

State law requires these protections in most permanent policies after the policy has built cash value. Cash surrender returns money but ends coverage. Reduced paid-up keeps a smaller policy with no more payments. Extended term keeps the full amount for a limited time. The default option is named in the policy. Pick the one that fits your goals.

Source: naic.org

Related terms

Reduced Paid-Up: Reduced paid-up is a nonforfeiture option that uses a policy's cash value to buy a smaller, fully paid permanent policy. No more premiums are due.
Cash Surrender Value: Cash surrender value is the amount a carrier pays you if you cancel a permanent policy, which is the cash value minus any surrender charges and unpaid loans.
Paid-Up Policy: A paid-up policy is a permanent life insurance policy where all required premiums have been paid. Coverage continues for life without any further premium payments by the owner.
Lapse: A lapse happens when a life insurance policy ends because the owner did not pay the premium by the end of the grace period. Coverage stops unless the policy is reinstated.
Cash Value: Cash value is the savings part of a permanent life insurance policy. It grows over time at a rate set by the policy and can be borrowed against or withdrawn, subject to the contract terms.

All 241 terms

Why it matters

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