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What are Non-Forfeiture Values
Non-Forfeiture values are option the insured has when they surrender a policy prior to maturity. Non-Forfeiture values are a contractural part of a Universal Life, Whole Life, and Endowment type of policy.
What 3 Non-Forfeiture Options are available??
1.Cash Surrender Value
2. Extended Term insurance
3. Paid up Insurance
What is Cash Surrender Value?
Cash surrender value is the amount of money the insured could recieve when they terminate a policy prior to maturity.
*The insured has a legal right to get the cash surrender value as long as they request it within a certain time period
*The amount is shown under guranteed values in the contract. Dividends may be available as well but are not shown in the contract bc Dividends are NEVER guranteed.
What adjustments could be made to a Cash Surrender Check??
1. A company may credit a small amount of unearned premium
2. Any unpaid loan balance would be deducted from the proceeds
3. Any interest due on the unpaid loan
What is the Extended Term option under Non Forfeiture Options??
This is when the insured has the options to use the values obtained from surrendering (terminating) a policy prior to maturity to purchase TERM INSURANCE for as long as it will last. The insurance is purchased for the same amount of the original face value of the policy
What is the Paid Up insurance option under the non-forfeiture options??
This option allows the insured to use their noon-forfeiture value to provide the largest possible policy that would be paid up with no further payments being required. This policy is of the same plan that was originally purchased but is adjusted to a reduced amount of coverage. The paid up insurance option provided coverage for life.
*Paid up insurance provides the longest period of protection
What Non Forfeiture option is elected if no option is made after a certain period of time??
If no option is made after a certain period of time then they usually choose EXTENDED TERM.
*None of the non forfeiture options would come into play if the insured had the Automatic Provison Loan on their policy.
What is the Automatic Provision Loan (APL)??
The Automatic PRovision Loan is an option the insured can put on their policy . Assuming that there is enough cash in the cash value to equal one premium payment, then this option would automatically borrow money from the policy values to keep the plan in force.
*If the APL activates then the cash value and the death benefits will decrease
What is a Settlement??
A settlement is an agreement between the policy owner and the insurance company as to how insurance values will be taken. The values can be made available in 2 ways:
1. In the even of a death of the insured
2. When alive, and you use the values that have built up
They can be set up in 2 ways:
A) By Owner-this is where the owner by contract can arrange for values to be set uo in a certain way in the event of death
B)By Beneficiary-this is where the owner of the policy has left it up to the benficiary to decide how they would like the the proceeds to be distributed in the event of the insured premature death.
How do ypu determine how much NET PROCEEDS will be distributed in the event of a death of the policy owner
ADD the following:
a. The face amount of the policy
b. Dividends, if any
c. Unearned premium
d. The interest must be credited from the 30th day followin PROOF OF LOSS
Then SUBTRACT the following:
a. Any outstanding loan balance
b. Any loan interest due
c. Any unpaid premium due
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