Non-Forfeiture Clauses

Each Whole Life insurance policy contract contains what are called non-forfeiture clauses.  These are designed to keep the policy in force if a client is unable (or unwilling) to pay the required premiums.  Since insurance companies actually want you to keep your policy in force, rather than lapsing it completely (lapsing means cancelling), these non-forfeiture clauses are here to help out.  While the specifics may vary between companies, the premise is usually the same.

The “Grace Period” allows you 30 days to catch up on a payment before the policy lapses.  So if your payment is due on the 15th of the month, and you don’t have the money immediately, you have 30 days (typically up to the 14th of the following month) to come up with the money and catch up with your payments.  After your 30-day grace period, there are still options to keep your policy in force, and the insurance company will default to the Automatic Premium Loan assuming that you have the required cash values.

There are three other main clauses that are already detailed in this glossary: the “’Automatic Premium Loan” or APL, the “Premium Offset” and the “Reduced Paid-Up Insurance”.  We won’t expand on those here as they are already detailed under their own categories.