Nonforfeiture Clause

What Does Nonforfeiture Clause Mean?

A nonforfeiture clause is a provision found in permanent life insurance policies and long-term care policies. It stipulates that if the policy lapses due to a missed premium payment, the insured will receive some of the benefits or a refund of the premiums paid.

In most cases, the insured must have made premium payments for at least three years before they can benefit from a nonforfeiture clause.

This clause is also referred to as a nonforfeiture provision.

Insuranceopedia Explains Nonforfeiture Clause

If the insurance policy has been in force for a sufficient period, the nonforfeiture values will take effect either when the insured’s coverage is terminated due to non-payment or when they choose to surrender the policy.

Depending on the policy, previous payments may be converted into a reduced coverage amount, the payment schedule may be adjusted, or the insurer may refund a portion of the premiums paid or the entire amount. The amount available depends largely on how much cash value the policy has built up, which is why buyers often look at which type of life insurance policy generates cash value when comparing options.

Another nonforfeiture option available to the insured is using the face value of the whole life insurance policy to purchase more affordable term life coverage. This kind of conversion is one reason it helps to know how much whole life insurance costs upfront, since the premiums you have paid in are what fund the nonforfeiture options later.