FX Life Policy Exam 2025: Riders, Provisions, Options, Exclusions

Nonforfeiture options are benefits that allow a policyholder to retain some value from their life insurance policy if they stop paying premiums. These options are designed to prevent the complete loss of the policy's benefits.

The cash surrender value provides the policyholder with a lump sum payment when the policy is surrendered. Extended term insurance allows the insurance coverage to continue for a specified time using the accumulated cash value, effectively converting it into a term policy. Reduced paid-up insurance allows the policyholder to convert the policy into a permanent policy with a lower face amount that does not require additional premium payments.

The interest-only option, however, is not a nonforfeiture option. It refers to a settlement option where the insurance company retains the death benefit and pays interest on it for a period of time, rather than allowing the policyholder to access any cash value or policy benefits. Therefore, it does not fit into the category of nonforfeiture options, which are specifically about retaining some value from the policy when it is no longer in force due to unpaid premiums.