Taking advantage of nonforfeiture options is by far one of the best decisions you can ever make. And this doesn’t come as a surprise if the numerous benefits destined to come your way are anything to go by. For those who might have no idea of what we are talking about, a nonforfeiture clause is an insurance policy clause that stipulates an insured party can receive fully or partial benefits of a partial refund of premiums after a lapse due to nonpayment.
Once you surrender a whole-life insurance policy, the death benefit automatically ceases to exist. It is highly recommended that you work with an insurance company that offers an annuity in the nonforfeiture clause. That being said, below are some of the common payout options under a nonforfeiture clause.
Cash Surrender Value
With the cash surrender value, the policy owner receives the remaining cash value in a span of six months under the nonforfeiture cash payment option. This option applies to the savings element of a whole life insurance payable before death. But you should always remember that during the early years of a whole life insurance, the saving options won’t guarantee as much as return as the premiums paid.
Extended-Term Insurance
The extended-term insurance nonforfeiture option allows the policy holder to use the cash value to purchase a term insurance policy with a death benefit similar to that of the original whole-life policy. In this case, the policy is calculated from the insured’s attained age. With this nonforfeiture option, the policy owner can stop paying the premiums but not forfeit the equity of their policy. It doesn’t stop at that since the amount of cash value built-in your policy will be reduced by the amount of any loans against it.
The Bottom Line
There is more to nonforfeiture options than what is merely included in this simple guide. To better understand what is destined to come your way, it is in your best interest that you do your homework. Alternatively, get in touch with an experienced insurance agent to help you out.