Arkansas Life and Health Insurance Practice Exam

Which statement is FALSE regarding Nonforfeiture Options?

1. They ensure that cash value is not forfeited if the policy lapses

2. They provide options like extended term insurance or reduced paid-up insurance

3. They are used when the insured lives to the endowment date of the policy or at the insured's death

4. They include the cash surrender value option

The correct answer is: They ensure that cash value is not forfeited if the policy lapses

Nonforfeiture options are features of life insurance policies that protect the policyholder from losing the cash value of the policy if it lapses due to non-payment of premiums. These options provide alternatives such as extended term insurance or reduced paid-up insurance, allowing the policyholder to maintain some form of coverage even if they can no longer afford to pay premiums. Option A is the FALSE statement because nonforfeiture options specifically ensure that the policy's cash value is not forfeited if the policy lapses; therefore, it is incorrect to state that nonforfeiture options do not serve this purpose. Options B, C, and D are true statements regarding nonforfeiture options, highlighting the different choices available to policyholders in case of policy lapse or surrender.