Nonforfeiture Clause

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.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  2. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  4. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  5. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  6. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
Trading Center