The three nonforfeiture options can easily be remembered with the acronym C-E-R and they are as follows:
1 – cash refund: If the policyholder selects this non-forfeiture option, the policy will be canceled and the insurer will mail a check to the policyholder. if the policy owner chooses cash surrender, there will be no more life insurance coverage and you may have to pay ordinary income tax if you receive more money than you paid into the policy for of premiums.
2 – Extended Term e: If the policy owner selects this option, the cash value of 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, the policyholder does not have to pay an additional premium and will have the same amount of coverage that he had in the original policy, but only for a limited time. Remember, term insurance is temporary. term life insurance is not permanent.
3 – rreduced payment: If the policy owner selects this non-forfeiture option, the cash value of their original policy is used as a one-time premium to purchase them in full paid. life policy. There are two things you need to know about this selection for your license 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 no expiration stock policy?
Any policy that accumulates cash value is a non-forfeiture value policy. In fact, the cash values in a policy are sometimes called non-forfeiture values. you need to know which policies will build cash value. term insurance does not have a cash value. In turn, term insurance does not have non-expiry values.
However, policies such as whole life and endowments accumulate cash value, meaning they both have non-forfeiture values. Generally, cash value will begin to accumulate in a policy after the first three years; however, single premium policies will have an immediate cash value.
what non-forfeiture options continue to build cash value?
If a policy owner chooses the reduced paid no lapse option, the cash value of their original policy will be used to purchase a single premium whole life policy. Whole life insurance is permanent and builds cash value. Remember, term insurance has no cash value, so if the owner selects the extended term option, there will be no further accumulation of cash value. Of course, if they select cash delivery, there is no further life insurance coverage.
which non-expiry option offers the most insurance protection?
well, think of it this way. Let’s say you have $50,000 that you’d like to use to purchase a life insurance policy. Between a whole life policy and a term policy, which policy might give you the most bang for your buck? Or, in other words, which policy would provide the most life insurance protection? finished!! term insurance has no cash value and is the cheapest form of life insurance.
Which non-expiry option provides the most protection? extended term! why? It’s the cheapest form of life insurance and doesn’t build up cash value!
why is a no expiration option used?
In most states, life insurance policies that accumulate cash value must have non-forfeiture values. What happens if the policyholder forgets to pay his premium and the policy lapses? can the insurance company keep the cash value? no! they are generally required by law to provide the policy owner with a choice about what they would like to do with their cash value. this is where non-expiry values come in!
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