What does a non-forfeiture option provide to a policyholder?

A non-forfeiture option is designed to provide an alternative benefit to policyholders who may no longer be able to pay their premiums, ensuring that they do not lose all of their benefits when the policy lapses due to non-payment. These options typically include several choices such as a reduced paid-up insurance or extended term insurance, allowing the policyholder to maintain some level of coverage even after premium payments have ceased. This is particularly important for individuals who may have invested significant premiums but face financial hardships that prevent them from continuing with their payments.

The other options do not accurately represent the purpose of non-forfeiture options. For example, while a complete refund of premiums would be a desirable outcome, it is not a feature of non-forfeiture provisions. Similarly, the ability to transfer a policy to another beneficiary does not relate to non-forfeiture options, nor does a guaranteed payout without conditions apply, as non-forfeiture options typically involve some adjustments to coverage rather than an unconditional payout.