Whole Life’s Non-Forfeiture Options: The Last Lines of Defense Against Lapse
Whole Life insurance policies provide guaranteed **Non-Forfeiture Options** that kick in automatically if a policyholder stops paying premiums after the cash value has been established. These options ensure the policyholder does not forfeit their accumulated equity.
The Three Contractual Options
If premiums are discontinued, the policyholder can choose (or the default option will apply):
- **Cash Surrender Value (CSV):** The policy is terminated, and the policyholder receives a lump-sum check for the CSV (Cash Value minus Surrender Charges).
- **Reduced Paid-Up (RPU):** The most common choice. The CSV buys a smaller, fully paid-up permanent policy (no more premiums).
- **Extended Term Insurance (ETI):** The CSV buys a new term life policy with the *same* death benefit as the original Whole Life policy. The term policy lasts for a specific, limited period determined by the CSV amount.
These options provide flexibility, allowing the policyholder to salvage permanent protection (RPU) or maximum temporary coverage (ETI).
Disclaimer: This content is for informational purposes only and is not financial or legal advice. The ETI option is temporary; if the insured outlives the term, coverage ends.