What are Nonforfeiture Values in an insurance policy?

Nonforfeiture values refer to the cash value accumulated in a life insurance policy that cannot be forfeited, even if the policyholder stops making premium payments. This means that these values are designed to protect the policyholder by ensuring that they have access to some benefits or cash value, even if the policy lapses due to non-payment of premiums.

Under the principles of nonforfeiture, if a policyholder pays premiums for a certain period and then decides to discontinue payments, they do not lose all the benefits accrued in the policy. Instead, they can access the cash value, converting it into options such as a reduced paid-up insurance, extended term insurance, or receiving the cash surrender value. This provision is important because it offers a safeguard for policyholders, recognizing the financial contributions they have made to the policy.

The other options address different concepts that do not accurately represent nonforfeiture values. Nonforfeiture values are not about values that can be forfeited or tied to tax liabilities or available only upon cancellation. They fundamentally focus on the security and retained benefits associated with the cash value of life insurance.