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Business Math17th EditionMary Hansen 3,684 solutions Mathematics with Business Applications6th EditionMcGraw-Hill Education 3,760 solutions Accounting: What the Numbers Mean9th EditionDaniel F Viele, David H Marshall, Wayne W McManus 338 solutions The three nonforfeiture options can easily be remembered with the acronym C-E-R and they are as follows: 1 – Cash Surrender – If the owner of the policy selects this nonforfeiture option, the policy will be canceled and the insurer will mail a check to the policy owner. If the policy owner elects cash surrender there will be no further life insurance coverage, and they may have to pay ordinary income tax if they receive more money than they paid into the policy in premiums. 2 – Extended Term – If this option is selected by the policy owner, the cash value from their original policy will be used to purchase a term policy that will have the same face amount (amount of insurance protection) as the original policy. If this option is selected, there is no additional premium due from the owner of the policy and they will have the same amount of coverage as they had in the original policy, but only for a limited time. Remember, term insurance is temporary. Term life insurance is NOT permanent. 3 – Reduced Paid-up – If this nonforfeiture option is selected by the policy owner, the cash value from their original policy is used as a single premium to purchase them a paid-up whole life policy. There are two things you need to know about this selection for your licensing exam. First, the amount of coverage under this new policy is reduced. Second, this new whole life policy will provide permanent coverage.
What is a nonforfeiture values policy?Any policy which accumulates cash value is a nonforfeiture values policy. In fact, the cash values in a policy are sometimes referred to as nonforfeiture values. You need to know which policies will accumulate a cash value. Term insurance has NO cash value. In turn, term insurance has no nonforfeiture values. However, policies such as whole life and endowments do accumulate cash value, which means they both have nonforfeiture values. Usually, the cash value will begin to accumulate in a policy after the first three years, however, single premium policies will have an immediate cash value. Which nonforfeiture options continue to build up cash value?If a policy owner elects the reduced paid-up nonforfeiture option, the cash value from their original policy will be used to purchase a single premium whole life policy. Whole life insurance is permanent and accumulates cash value. Remember, term insurance has no cash value, so if the owner selects the extended term option, there will be no further cash value accumulation. Of course, if they select cash surrender, there is no further life insurance coverage at all. Which nonforfeiture option provides the highest amount of insurance protection?Well, think of it this way. Say you have $50,000 that you would like to use to buy a life insurance policy. Between a whole life and a term policy, which policy would be able to provide you the biggest bang for your buck? Or, in other words, which policy would provide the highest amount of life insurance protection? Term!! Term insurance has no cash value and is the cheapest form of life insurance. Which nonforfeiture option provides the highest amount of protection? Extended Term! Why? It’s the cheapest form of life insurance and accumulates no cash value! Why is a nonforfeiture option used?In most states, those life insurance policies that accumulate cash value are required to have nonforfeiture values. What if the owner of the policy forgets to pay their premium and the policy lapses? Can the insurance company just keep the cash value? No! They are generally required by law to provide the owner of the policy a choice of what they would like to do with their cash value. This is where the nonforfeiture values come in! What else can help me prepare to pass my insurance licensing exam on my first attempt?If you need any help preparing to pass an insurance licensing exam, we have some excellent courses which are primarily video-based. Check out our available courses now: Insurance Licensing Exam Prep Video Training Courses Other tips to help you pass your insurance licensing exam on your first attempt: Insurance Exam Test Taking Tips Also, check out our definition and question of the day videos on our YouTube channel: PassMasters Insurance Exam Prep YouTube Channel What are the 3 Nonforfeiture options?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 following is an example of a Nonforfeiture option?The three types of nonforfeiture options available are: Cash surrender. Reduced paid-up insurance. Extended term insurance.
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.
Which of the following Nonforfeiture options does not allow the insured to reinstate the policy?The extended term and reduced paid-up nonforfeiture options allow the policyowner to reinstate the original policy because coverage is still in effect. However, the cash surrender option does not allow the policy to be reinstated because the policy has been surrendered for its cash value, and no coverage remains.
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Which of the following are Nonforfeiture options?
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