When is a non-forfeiture option typically selected by a policy owner?

A non-forfeiture option is typically selected by a policy owner when they are considering the options available under a whole life or endowment policy. These options come into play when a policyholder might stop paying premiums or when the policy matures. Non-forfeiture options are designed to protect the policyholder’s interests by allowing them to access some benefits or value of their policy instead of losing everything.

When a policy owner chooses a whole life or endowment policy, they agree to specific terms, including premium payments and benefits, which includes the accumulation of cash value. If the policyholder later chooses to discontinue those premium payments, they have the right to select a non-forfeiture option, such as taking the cash surrender value, using it to purchase paid-up insurance, or applying it towards extended term insurance. This provides the policyholder with options that retain some level of value from the policy they initially invested in.

Other choices, such as selecting a non-forfeiture option at policy renewal, policy cancellation, or upon reaching retirement age, do not align with the nature of how non-forfeiture options function within the life insurance contract. These options are intrinsically tied to the decision-making process when a policy owner encounters a change in their commitment to