Nonforfeiture Clause

AAA

DEFINITION of '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 EXPLAINS 'Nonforfeiture Clause'

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
  1. Values

    The worth of a nonforfeiture clause that specifies that an insured ...
  2. Forfeited Share

    A share in a company that the owner loses (forfeits) by failing ...
  3. Long-Term Care (LTC) Insurance

    Coverage that provides nursing-home care, home-health care, personal ...
  4. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  5. Cash Surrender Value

    The sum of money an insurance company will pay to the policyholder ...
  6. Premium

    1. The total cost of an option. 2. The difference between the ...
Related Articles
  1. Home & Auto

    LTC Annuities: 2 Safety Nets In 1

    Pairing insurance and an annuity sounds good, but do you really need this much coverage?
  2. Home & Auto

    A New Approach To Long-Term Care Insurance

    This practical product can protect you from the rising cost of care and provide for your beneficiaries at the same time.
  3. Options & Futures

    Profit From Unwanted Life Policies With Life Settlement

    With a life settlement you could cash in on your policy money now.
  4. Home & Auto

    Taking The Surprise Out Of Long-Term Care

    Don't be caught unprepared - find out what to look for in LTC insurance policies.
  5. Insurance

    How to Use a Waiver of Subrogation

    A waiver of subrogation means that a party to a contract waives the right to allow someone (usually an insurance company) to sue the other party to the contract in case of a loss.
  6. Retirement

    What is an equity-indexed annuity?

    Understand what an equity-indexed annuity is, its advantages and disadvantages, and how it differs from other annuity investments.
  7. Insurance

    What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider when purchasing insurance.
  8. Insurance

    What are the tax implications of a life insurance policy loan?

    Learn the instances in which you are required to pay taxes on a life insurance policy loan, so you can avoid making a costly mistake.
  9. Insurance

    What's the difference between renter's insurance and homeowner's insurance?

    Renters insurance and homeowners insurance offer similar benefits for occupants and homeowners, but in different ways and for different reasons.
  10. Insurance

    How the Affordable Care Act Changed Insurance

    6 Ways Obamacare Impacts the Health Insurance Marketplace

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center