What Does Nonforfeiture Clause Mean?
It refers to a provision present in an insurance contract allowing the insured to get refund of the payments made until that time, or some/part of the benefits in case he does not manage to make a premium payment. However, this means the policy becomes forfeited.
One should know that such a Nonforfeiture clause is confined within limits and can only be exercised after the contract has been valid for some predefined years.
Nonforfeiture Clause Explained
These clauses may exist both in standard insurance types and in care insurances made for the long-term. The clause can result in the return of a part of the accumulated premiums that have already been paid. Another type refers to the return of the contract’s cash surrender value. The third situation involves decreasing the insured’s benefits.
Although there is no one who would opt for letting an existing insurance contract lapse, nonforfeiture clauses can guarantee that there will be no serious negative consequences if one misses a premium-payment for instance.
One never knows if a situation comes when he will not be able to make premium payments for an extended period. So it is useful to think about a nonforfeiture clause which is an expense, but it is an additional security as well.