« 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 is cash surrender option?Cash surrender value is money an insurance company pays to a policyholder or an annuity contract owner if their policy is voluntarily terminated before maturity or an insured event occurs. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies.
What is an example of Nonforfeiture?Nonforfeiture Payout Options
Automatic premium loan: When a policy lapses due to non-payment, some insurance companies allow the policyholder to borrow the amount of lapsed payments from their policy's accumulated cash value.
Which of the following is not a Nonforfeiture option?All of the following are nonforfeiture options, EXCEPT: Accumulate at interest is a dividend option. Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid?
What Nonforfeiture options build up of 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.
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