Chances are you’ve come across the nonforfeiture clause at some point when searching around for an insurance policy to leverage. Well, it is easy to wonder what goes into this clause and whether or not it is worth leveraging. Fortunately, we are here to help clear some of the doubts you might be having in mind regarding the nonforfeiture clause.
In this simple guide, we will take you through some of the things you ought to know about the nonforfeiture clause and why it is even important in the first place. Keep on reading to find out more before deciding on anything.
What is Nonforfeiture Clause?
First things first, you ought to understand what a nonforfeiture clause is. To cut the long story short, it is an insurance policy clause stipulating that an insured part is able to receive full or partial benefits or a partial refund after expiry due to nonpayment. In most cases, the standard life insurance and long-term care insurance will include the nonforfeiture clause.
One thing you should remember is that the clause may also entail some portion of the total premium paid. Furthermore, it also includes the cash surrender value of the policy or a reduced benefit. Of course, this is based upon premiums paid before the policy lapsed.
How does it Work?
Now that you already know what it entails, it is easy to wonder how the nonforfeiture works. When the owner of whole-life insurance policy decides to surrender the policy, then the nonforfeiture option will automatically become available. It is then that the insurance company can guarantee a minimum cash value for the insurance after the specified period. This could be about three years from the moment it was placed in force.
The Bottom Line
There you have it, some of the things you probably did not know about nonforfeiture clauses. It is highly recommended that you do your due diligence and examine what it entails. Through this action, you can increase your chances of reaping maximum benefits from nonforfeiture clauses without going through a lot.
