Long Term Care Certification Practice Test

How does the nonforfeiture option benefit an insured individual?

1. It allows for a full refund of premiums

2. It guarantees a reduced death benefit

3. It preserves a portion of benefits, even if premiums aren’t paid

4. It requires payment of higher premiums

The correct answer is: It preserves a portion of benefits, even if premiums aren’t paid

The nonforfeiture option is a critical feature in insurance policies, particularly life insurance, that serves to protect the policyholder's investment in the policy. This option ensures that if the insured individual stops making premium payments, they do not lose all of the benefits accrued over time. Instead, it allows the insured to retain a portion of the benefits, which could take the form of a reduced death benefit or a cash surrender value, depending on the specifics of the policy. This preservation of benefits is vital because it provides financial security to the policyholder, allowing them to access some value from their policy instead of forfeiting everything due to an inability to continue paying premiums. This feature is particularly beneficial in long-term care scenarios, where clients may face circumstances that affect their ability to pay premiums but still want to ensure some level of financial protection for their beneficiaries or themselves. Other options like a full refund of premiums or the requirement to pay higher premiums do not align with the purpose of nonforfeiture options, as they do not relate directly to the preservation of benefits when premium payments cease.