What type of options safeguard the accumulated cash value in an insurance policy?

Nonforfeiture options are designed to protect the accumulated cash value in a life insurance policy. These options ensure that if a policyholder decides to discontinue premium payments or surrenders the policy, they do not lose the cash value that has built up over the years. Instead, nonforfeiture options provide alternative benefits that allow the policyholder to retain some value from their policy.

For instance, if a policyholder stops paying premiums but has built up cash value, they may be able to choose to have the policy continue as a reduced paid-up insurance policy, use the cash value to purchase term insurance, or receive a cash surrender value. These provisions are crucial for providing policyholders with flexibility and financial stability, as they can still access some benefits even if they can no longer maintain the original policy structure.

In contrast, settlement options relate to how the death benefit is paid out to beneficiaries rather than the accumulation of cash value. Dividend options pertain to the distribution of dividends from participating policies, which may enhance cash value but do not directly protect it. Cash value options are more general and don’t specifically address the nonforfeiture provisions that ensure the protection of accumulated cash value.