PSI Life Exam Practice Test 2025 - Free Life Insurance Exam Questions and Study Guide

Question: 1 / 400

What is the purpose of a non-forfeiture option in life insurance?

To allow policyholders to increase their coverage

To provide benefits if premiums are not paid

The purpose of a non-forfeiture option in life insurance is to provide benefits to policyholders when they are unable to pay their premiums. Essentially, these options are designed to protect the policyholder's investment in their life insurance policy, even if they lapse it due to non-payment.

When a policyholder opts for a non-forfeiture option, they can typically choose to receive a reduced paid-up insurance policy or cash value, which ensures that they still receive some benefit from their policy rather than losing everything they have paid in. This is particularly important in providing a safety net, as it helps avoid a total loss of coverage and gives the policyholder alternatives for utilizing the policy's value.

In contrast to this, options involving increasing coverage, additional riders, or premium reductions do not address the core purpose of non-forfeiture provisions, which is to safeguard the benefits that have already been accrued in the policy.

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To offer additional riders for policy enhancements

To reduce the premium amount over time

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