New Jersey Life Producer Practice Exam

Question: 1 / 400

What do "non-forfeiture options" protect in a life insurance policy?

The policyholder's cash value if the policy lapses or is surrendered

Non-forfeiture options are designed to provide a safeguard for the policyholder’s cash value in the event that the policy lapses or is surrendered. In a life insurance policy with a cash value component, non-forfeiture options ensure that the policyholder does not completely lose their accumulated cash value if they are unable to keep the policy active due to non-payment of premiums.

When a policy lapses, rather than losing all benefits, the non-forfeiture options allow the policyholder to choose alternatives like receiving the cash value as a lump sum, converting the policy into a reduced paid-up insurance policy, or using it as extended term insurance. These options help protect the insured's financial interests and provide them with alternatives even after they stop making premium payments.

Therefore, the correct response highlights the purpose of non-forfeiture options in life insurance, emphasizing their role in preserving the cash value for the policyholder rather than simply losing it.

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The premiums paid in case of policyholder's death

The insurance company from bankruptcy claims

The insurer's profits in the event of early termination

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