Utah Life Producer Practice Exam

When a policyholder stops paying premiums on a life insurance policy, the most common outcome is that the policy may lapse, which activates non-forfeiture options. This means that instead of the policy simply disappearing without any value, the insured still has certain benefits to consider.

Non-forfeiture options are built into many life insurance policies to protect the policyholder from losing all value should they stop premium payments. For example, these options might include the ability to convert the policy into a reduced paid-up insurance policy, which provides some level of coverage without requiring additional premiums. Alternatively, the policyholder may have the option to take out a cash surrender value.

In essence, while the immediate cancellation or loss of benefits may seem like a straightforward outcome, the activation of non-forfeiture options presents a safety net for policyholders, allowing them to retain some benefits from their investment in the policy, even if they can no longer make premium payments.