Nonforfeiture Clause
A clause in an insurance policy that allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse. The nonforfeiture clause may only be in effect for a limited period of time, and may only kick in after the policy has been active for several years. Investopedia Says:
Nonforfeiture clauses can be found in standard types of life insurance as well as long-term care insurance. The clause may involve returning some portion of the total premiums paid, the cash surrender value of the policy, or a reduced benefit based on the amount of premiums that were paid up until the policy lapsed.
While nobody should plan on letting a policy lapse, a nonforfeiture clause can be a savior if somebody forgets to pay premiums or is unable to pay them for an extended period. Having a nonforfeiture clause will typically add to the premium amount over a similar policy without one. Related Terms:
Cash Surrender Value
Insurance
Long-Term Care (LTC) Insurance
Premium
Universal Life Insurance |