Which of the following is NOT considered a Nonforfeiture option?

Which of the following is NOT considered a Nonforfeiture option?

• A. Cash Surrender
• B. Reduced Paid-Up Insurance
• C. Extended Term Insurance
• D. Interest Only

Answer: (D)

A Nonforfeiture option is a provision in a life insurance policy that prevents the loss of accrued benefits when a policyholder stops paying premiums. There are typically three main types of Nonforfeiture options: Cash Surrender, Reduced Paid-Up Insurance, and Extended Term Insurance. Cash Surrender allows the policyholder to receive the accumulated cash value of the policy if they choose to terminate it. Reduced Paid-Up Insurance enables the policyholder to convert their policy into a form of coverage that does not require further premium payments, using the cash value to purchase a reduced amount of paid-up insurance. Extended Term Insurance allows the policyholder to use the cash value to buy term insurance for the same face amount as the original policy for a specified period without needing to pay further premiums. On the other hand, the Interest Only option pertains to how death benefits may be paid out rather than a Nonforfeiture choice. In this scenario, the insurer retains the death benefit and instead pays interest on the principal amount for a period until the beneficiary decides on how to receive the payment. This distinction makes it clear why the Interest Only option is not categorized as a Nonforfeiture option.

A Nonforfeiture option is a provision in a life insurance policy that prevents the loss of accrued benefits when a policyholder stops paying premiums. There are typically three main types of Nonforfeiture options: Cash Surrender, Reduced Paid-Up Insurance, and Extended Term Insurance.

Cash Surrender allows the policyholder to receive the accumulated cash value of the policy if they choose to terminate it. Reduced Paid-Up Insurance enables the policyholder to convert their policy into a form of coverage that does not require further premium payments, using the cash value to purchase a reduced amount of paid-up insurance. Extended Term Insurance allows the policyholder to use the cash value to buy term insurance for the same face amount as the original policy for a specified period without needing to pay further premiums.

On the other hand, the Interest Only option pertains to how death benefits may be paid out rather than a Nonforfeiture choice. In this scenario, the insurer retains the death benefit and instead pays interest on the principal amount for a period until the beneficiary decides on how to receive the payment. This distinction makes it clear why the Interest Only option is not categorized as a Nonforfeiture option.