A nonforfeiture option is one of several choices available to a policyowner when they stop paying premiums on a life insurance policy that has built up cash values, allowing them to preserve some level of benefit instead of forfeiting the contract entirely. Common nonforfeiture options include taking the cash surrender value, electing reduced paid-up insurance (a smaller, fully paid policy), or using the cash value to purchase extended term insurance for the original face amount over a limited period. Policy provisions and state laws govern which options are available and how values are calculated. Nonforfeiture options are designed to protect consumers and recognize the equity they have built up through prior premium payments, even if they can no longer maintain the policy as originally structured.

In day-to-day advisory work, nonforfeiture options are discussed when clients face financial strain, policy underperformance, or changing insurance needs. Advisors use inforce illustrations to show how much reduced paid-up coverage or extended term period a client can obtain, comparing these choices to simply surrendering for cash. For example, a client approaching retirement might choose reduced paid-up coverage to keep a smaller permanent benefit without further premiums. Another client might prefer extended term coverage to maintain a higher death benefit during a remaining mortgage or income-replacement period. Understanding nonforfeiture options allows advisors to offer tailored solutions that honor the value already built in the policy while addressing new financial realities.