Nonforfeiture clause

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Nonforfeiture Clause

A clause in some insurance policies entitling a policyholder to receive the benefit, or a portion of it, for a short period of time after allowing the policy to lapse. That is, if the policyholder does not pay the premium as agreed, he/she is still entitled under a nonforfeiture clause to the benefit should the insured event occur within a certain, brief period of time. Alternatively, a nonforfeiture clause may entitle a policyholder to a partial refund of the premiums paid.

Nonforfeiture clause.

If there is a nonforfeiture clause in your insurance policy contract, and you have let the policy lapse because you haven't paid a premium that's due, you may qualify for the benefit named in the contract for a limited time, for a smaller benefit, or for a partial refund of your premium.

However, the added protection of adding a nonforfeiture clause generally increases the premium for the policy.

References in periodicals archive ?
The living benefits may be availed of through any of four nonforfeiture benefit options: a) loan value, b) extended term insurance, c) paid up insurance, and d) cash surrender value.
(A policy expires when it has run past its grace period with premiums unpaid and has exhausted any benefits available under the nonforfeiture option or when the policyowner has allowed the policy to lapse by not paying the next premium due and then decides to cash in the policy.)
(1) The cash value of the policy is also known as the nonforfeiture value since this is the least amount the insurer can pay to a surrendering policyholder.
For example, if the plan had used higher interest rates or a mortality table with shorter life expectancies to determine the annuity amount, then the amount that exceeded the benefit derived would have been subject to the nonforfeiture rules and would have been included in the employee's annual benefit.
challenged in court for violating ERISA nonforfeiture provisions, but
As a result, preneed insurance policies issued on or after January 1, 2009, and before January 1, 2012 can use the 2001 CSO Mortality tables that lists different mortality rates for men and women to determine the minimum standard for reserves and nonforfeiture benefits.
Generally, any vesting (nonforfeiture) provision permitted by the Code can be used in a profit sharing plan; however, special vesting requirements must be met with respect to matching contributions.
* The nonforfeiture provision shall be appropriately captioned;
Furthermore, by standing as ready purchasers of policies, firms in the secondary market could discourage the repeal of nonforfeiture laws and keep incumbent insurers from the unfair and ultimately unworkable practice of using high lapse expectations to under price certain policies.
State laws specify standard nonforfeiture options that companies must offer to policyholders, while the Internal Revenue Code offers certain tax advantages for policy ownership.
nonforfeiture provisions (cash surrender, extended term and paid up insurance);
nonforfeiture values: Those values or benefits in a life insurance policy that by law the policyowner does not forfeit, even if he or she chooses to discontinue payment of premiums.