Non-Forfeiture Options

Non-forfeiture options are the choices available to a permanent life insurance policyholder if premiums can no longer be paid, allowing the policy's accumulated cash value to provide continuing benefit rather than being forfeited entirely. The three standard non-forfeiture options are: (1) Cash surrender value — receive the net cash value and terminate coverage; (2) Extended term insurance — use the cash value to purchase a fully paid-up term policy for the original face amount for a specified period; (3) Reduced paid-up insurance — use the cash value to purchase a smaller, fully paid-up permanent policy with no further premiums required. Non-forfeiture options must be disclosed in every permanent policy.