If a cash-value policy is purchased, a policyholder pays more than is actuarially necessary for the life insurance protection. Thus, he or she should get something back if the policy is surrendered. The payment to a withdrawing policyholder is known as a nonforfeiture value or cash-surrender value.
All states have standard nonforfeiture laws that require insurers to provide at least a minimum nonforfeiture value to policyholders who surrender their policies. There are three nonforfeiture options or cash-surrender options:
Reduced paid-up insurance
Extended term insurance
The policy can be surrendered for its cash value, at which time all benefits under the policy cease. A policy normally does not build ...