What does the term "non-forfeiture option" refer to in life insurance?

The term "non-forfeiture option" in life insurance specifically refers to the provisions that come into play when a policyholder stops paying premiums on a whole life insurance policy. If the policy lapses due to non-payment, the non-forfeiture options provide the policyholder with certain guaranteed benefits rather than losing their accumulated value entirely.

When a policyholder opts for non-forfeiture benefits, they have options such as receiving the cash value of the policy, utilizing it to purchase a reduced paid-up policy, or converting it to extended term insurance. This means that even if premiums are no longer being paid, the policyholder does not completely lose the benefits they have built up over time.

The other options listed do not accurately describe non-forfeiture options. Withdrawal of cash value refers specifically to taking out a portion of the cash value, rather than dealing with premium payments. High-risk coverage termination does not relate to the benefits associated with a policy lapsing. Claim payment choices generally pertain to how the death benefit is paid rather than the status of the policy due to premium payment lapses. Therefore, understanding non-forfeiture options is essential for policyholders to know their rights and benefits if they encounter difficulties with maintaining premium payments.