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.

BREAKING DOWN '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.

  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. Premium

    1. The total cost of an option. 2. The difference between the ...
  6. Cash Surrender Value

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