« Back February 10, 2021 Insurance is a highly-regulated industryWe can credit our favorite kite-flying forefather, Benjamin Franklin, for playing a major role in founding the life insurance industry in the United States in the 1700s1 but it was not until the mid-19th century that the regulatory framework for the industry was created.2 Insurance regulations were developed to protect consumers in three main areas: the financial solvency of insurance companies, the products they sell, and market conduct and prevention of unfair trade practices.2 Almost all regulations that life insurance companies must follow are state laws rather than federal laws. Each state has a state insurance department, which means that a life insurance company that operates in each state must adhere to the governing laws of every state they operate in.3 The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories. NAIC acts as a forum for the creation of model laws and regulations, but generally, each state decides whether to pass these model laws and regulations. States are allowed to make changes during the enactment process but the model laws and regulations are widely adopted.2 Extenuating Circumstances
If the policyholder doesn’t select an option, the insurance company will have a default option contained in the policy’s language. The Extended Term Option is often the insurance company’s default option. There are other non-forfeiture options, but not all insurance companies make these options available.
If you find yourself in a situation where you cannot or no longer wish to pay the premiums on a life insurance policy with a cash value, using one of the non-forfeiture options may be a good choice for you. Keep in mind that non-forfeiture options may adversely impact some coverage; for example, reducing the face amount or canceling the policy completely. Your insurance agent can help you weigh the pros and cons so you can decide what is best for you.
Categories: insurance, life insurance « Back What are Nonforfeiture options in whole life insurance?A non-forfeiture option. (or clause) is a provision included in certain life insurance policies stipulating that the policyholder will not forfeit the value of the policy if the policy lapses after a defined period due to missed premium payments.
What are three Nonforfeiture options available to policyholders who have a permanent type of life insurance policy?There are three nonforfeiture options: (1) cash surrender; (2) reduced paid- up insurance; and (3) extended term insurance. If a policyowner chooses, he/she may request a cash payment of the cash values when the policy is surrendered.
Which of the following Nonforfeiture options of a life insurance policy allows a policyowner?What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage? The extended term option permits the policyowner to use the policy's cash values to buy paid-up term insurance.
Is extended term a Nonforfeiture option?Extended term insurance is the default non-forfeiture options. With the extended term insurance the face amount of the policy stays the same, but it is flipped to an extended term insurance policy. The equity you built is used to purchase a term policy that equals the number of years you paid premiums.
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