What are Nonforfeiture Options in insurance?

Nonforfeiture options in insurance refer to the rights and benefits that a policyholder retains even if they stop making premium payments or decide to lapse the policy. These options are designed to protect the policyholder's accrued benefits, acknowledging that they have paid into the policy and providing a safety net even in the event of nonpayment.

When a policyholder stops payment, nonforfeiture options come into play. They allow the insured to access the value accumulated within the policy over time, which cannot simply be forfeited. This ensures that the policyholder receives some benefit for their prior investment, rather than losing everything. For example, a life insurance policy may allow the policyholder to convert their policy to a reduced paid-up insurance, cash surrender value, or extended term insurance, all of which preserve some measure of the benefits earned.

The emphasis on "benefits that cannot be forfeited" highlights the fundamental principle behind nonforfeiture provisions: they ensure that the policyholder is not left empty-handed after contributing to their insurance policy. This makes nonforfeiture options a crucial component of life insurance policies, particularly in providing financial assurance and safeguarding the interests of policyholders.