Nonforfeiture Clause

A nonforfeiture clause is a provision in a life insurance policy that protects the policyholder from losing all of their money if they cancel the policy before it matures. There are two main types of nonforfeiture clauses: cash value and paid-up additions.

**Cash value**

A cash value life insurance policy accumulates cash value over time. The cash value is the amount of money that the policyholder would receive if they surrendered the policy. With a cash value nonforfeiture clause, the policyholder is guaranteed to receive at least the cash value of their policy if they cancel it before it matures.

**Paid-up additions**

A paid-up additions life insurance policy allows the policyholder to make additional premium payments in addition to the regular premium. These additional payments are used to purchase paid-up additions, which are permanent life insurance policies that are paid up in full. With a paid-up additions nonforfeiture clause, the policyholder is guaranteed to receive at least the value of the paid-up additions if they cancel the policy before it matures.

Nonforfeiture clauses are important because they protect policyholders from losing all of their money if they cancel their policy before it matures. However, it is important to note that nonforfeiture clauses do not always provide full protection. For example, the cash value of a life insurance policy may be reduced if the policyholder misses premium payments. Additionally, the value of paid-up additions may be reduced if the policyholder surrenders the policy before it matures.

If you are considering purchasing a life insurance policy, it is important to understand the nonforfeiture clause. This will help you to make an informed decision about whether or not a particular policy is right for you.