Non-Forfeiture Value VS Non For. Rider

[Crazy Rick]

Here's how I understand Non-Forfeiture Riders:
IF there's cash value (I don't see how in a LTC plan unless the client bought a "Paid Up" policy at inception), the cash value can be used to pay the premium to re-instate the policy after it has lapsed past normal termination. Yes?

This concept is different than Non-Forfeiture Values. These are with Life insurance plans such as Whole Life and Universal whereby there ARE cash values associated with these plans if the client doesn't want his policy anymore, the cash value is what they'll get returned to them. Yes?

The only reason why I'm asking is because I know the protocal with the initial presentation and Non-Forfeiture Values have to be discussed with the prospect and I want to ensure I have two different ideas above, not one. One is an optional rider, the other is the cash value basically.

CR

 

[Mr_Ed]

Crazy Rick,

There are a few different definitions of a non-forfeiture rider for a long term care policy.

The most common is called a "shortened benefit period" nonforfeiture rider. It means that if the applicant cancels (or lapses) the policy after the policy has been in-force for a minimum number of years (usually 3), then the policyholder would receive a small paid-up policy in its place. The small, paid-up policy, would have a Lifetime Maximum Benefit equal to the amount of premiums that were paid.

This rider usually adds about 5% to the cost of a policy.

Most policies include automatically a "contingent nonforfeiture" rider, which means that if the insurer has a "significant rate increase" (as defined in the rider), then the policyholder has the option to change the policy into a small paid-up policy, with a Lifetime Maximum Benefit that is equal to the amount of premiums that were paid.

There are no nonforfeiture riders that will "re-instate" a policy after it has lapsed. Most policies have a "reinstatement" clause that allows a lapsed policy to be re-instated under certain conditions.

Ask your MGA for some sample policies and read them through.

 

[Crazy Rick]

Ok, thanks. The threatening language I've been reading concerning the INITIAL PRESENTATION!!! (add scary music here) and things that MUST be done! Yadda, yadda began to confuse me. BTW just got my MetLife appointment confirmation in the mail. Yeah!