Common Whole Life Insurance Cash Value And Nonforfeiture Options Explained

In this article, I explain common Whole Life Insurance Cash Value Options that you can select to make sure that your policy meets your individual financial goals.

Required Nonforfeiture Options

As permanent life insurance policies, such as is the case with Whole Life policies, there are specific guarantees that are included in the policy that can’t be forfeited by the owner of the policy. Such guarantees, otherwise known as ”nonforfeiture options”, are required by most states to be included in the policy. A policy owner has the right to exercise nonforfeiture values by choosing either of the following options: cash surrender value, reduced paid-up insurance, or extended term.

Cash Surrender Option

This option enables the policyowner to simply surrender the policy to the insurance company for the current cash value at a time that the policy is either not needed or affordable. Typically there is a ”surrender charge” that the policyowner is charged when cashing the policy. In this case, you will receive a check from the insurance company for the accumulated cash value, less the surrender charge. The amount of the surrender charge is listed in the policy, which is typically a percentage of the monies accumulated.

Reduced Paid-up Insurance Option

This option provides that the cash value accumulated is used by the insurance company to purchase a single premium (one time payment) permanent policy that has a reduced death benefit from that of the original policy. The death benefit is permanent and no future payments ever have to be made for the coverage. Note: The paid up policy will continue to build cash value until the death of the insured.

Extended Term Option

Under this option the insurance company uses the cash value of the policy to purchase a term life policy in the same face amount as the whole life policy. This doubles the death benefit for the duration of the term policy.

Generally, if you don’t select a nonforfeiture option when purchasing your policy, the insurance company will automatically use this option to extend coverage.

Comparing Policies

You should not only compare quotes, but should also compare policies side by side to make sure you’re getting the full benefits that you desire. When one insurance quote is half the price of another, there is usually a reason.

Recommended Site: is a FREE life insurance quote calculator that allows you to compare top companies, policy details and quotes side by side.

Thank you for reading,

Christy Love

Christy Love is a retired life insurance agent with over 30 years of experience in helping people protect what matters most… their families. As an expert author, Christy enjoys sharing her knowledge of life insurance with the online community.

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