Under the Texas nonforfeiture law, TIC Chapter 1105 and 28 TAC 3.3844, which of the following is a standard nonforfeiture benefit that a life policy with cash values must provide?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
The Texas nonforfeiture law, TIC Chapter 1105 as implemented by 28 TAC 3.3844, requires that a life insurance policy which accumulates cash value provide nonforfeiture benefits so that an owner who stops paying premiums does not forfeit the value already built into the policy. The standard options are the cash surrender value, reduced paid-up insurance, and extended term insurance; extended term insurance applies the net cash value as a single premium to continue the existing amount of insurance for as long as that value will purchase. In practice, if the owner makes no election, the policy's own default provision applies rather than the coverage simply disappearing at the end of the grace period.
Why the other options are wrong
- A) Paid-up additions are a dividend option on a participating policy, not a nonforfeiture benefit that arises when premium payments stop.
- B) An accelerated death benefit is an optional living-benefit rider and is not one of the standard nonforfeiture options.
- C) Waiver of premium is an optional disability rider, not a nonforfeiture benefit required by TIC Chapter 1105.
Memory hook
Nonforfeiture means cash, reduced paid-up, extended term — the three that survive a lapse.