What is a non-forfeiture provision in a life insurance policy?

A non-forfeiture provision in a life insurance policy is designed to protect policyholders by ensuring that if they decide to discontinue premium payments, they will still receive some benefits or cash values accumulated in the policy. This feature is crucial because it provides a safeguard, allowing individuals to benefit from their investment even if they are unable to continue making regular payments.

For example, if an insured individual stops paying premiums after several years, the non-forfeiture provision would enable them to either receive a cash surrender value, convert the policy into a reduced paid-up policy, or use the cash value to pay for future premiums. This provision acknowledges the contributions made by the policyholder, offering them some financial return rather than losing all value upon termination of payments.

In contrast, the other options do not accurately reflect the essence of non-forfeiture provisions. Some provide incorrect benefits or guarantees that do not apply in the context of these provisions, particularly in terms of permanence or unlimited coverage. The correct understanding of non-forfeiture provisions is essential for policyholders to make informed decisions about their life insurance needs.