Montana State Life Insurance Practice Exam

What does the Nonforfeiture Provision protect against?

1. Loss of benefits if premiums are not paid

2. Exclusion of pre-existing conditions

3. Changes in underwriter's fee structure

4. Discontinuation of service if policy lapses

The correct answer is: Loss of benefits if premiums are not paid

The Nonforfeiture Provision is designed to protect policyholders from losing the benefits accrued in their life insurance policy if they stop making premium payments. This provision ensures that even if a policy lapses due to non-payment, the policyholder has some guaranteed value that can be accessed, such as receiving a cash surrender value, converting the policy to a reduced paid-up insurance, or extending term insurance for a certain period. This protection is vital for policyholders because it provides them with an assurance that they will not lose all their invested premiums if they face financial difficulties and cannot pay their premiums. Therefore, the Nonforfeiture Provision serves as a safety net, allowing the policyholder to retain some value or benefits from their policy, even in adverse situations.