What is a Non-Forfeiture Option?
A Non-Forfeiture Option is a provision within a life insurance policy that enables the policyholder to maintain certain benefits or receive partial compensation if they can no longer pay premiums. This feature is typically available in whole life insurance or permanent life insurance policies, where it ensures that the value built up in the policy isn’t entirely lost if the policy lapses due to non-payment.
When a policyholder chooses a Non-Forfeiture Option, they may have several choices, such as converting the policy’s cash value into a reduced paid-up insurance policy, opting for extended term insurance, or receiving the cash surrender value. For instance, a reduced paid-up option allows the policyholder to retain life insurance coverage at a lower amount without further premium payments. The extended term option, on the other hand, provides the same coverage amount for a specified term, using the cash value to cover the premiums temporarily.
This option is particularly beneficial for individuals who find themselves unable to continue paying premiums but still want to preserve some value from the policy. Non-forfeiture options give policyholders flexibility and assurance that they won’t lose all the benefits they’ve paid for, even if financial circumstances change.
Non-forfeiture options may vary depending on the insurance company and the specific policy, so it’s advisable for policyholders to review these provisions carefully when purchasing a policy.