Forfeiture Laws for Non-standard Life Insurance
Forfeiture laws for life insurance allow you to take some or all of the cash value of a life insurance policy when you cancel the policy. These laws apply equally to non-standard life insurance. However, the amount of money you receive may be limited due to the inherent structure of the policy.
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Type
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Non-standard life insurance is graded-benefit life insurance. This life insurance policy is for high-risk individuals who cannot be fully underwritten. Underwriting is the process of analyzing a person's heath status and taking many tests to determine whether the person applying for insurance is an acceptable risk. With graded-benefit insurance, the insurance company knows that the risks are exceptional and does not bother with a health exam.
Limitations
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The policy's cash reserve amount building up inside the policy may build slower than other life insurance plans. The forfeiture options for non-standard life insurance, however, are the same. You receive the net cash surrender value of the policy. This is the amount of money less any penalties charged by the insurance company for cashing out the policy early. Since it's expensive to insure you if you need this type of policy, the insurer may impose especially high penalties on your policy, making the ultimate surrender value lower than it otherwise would be.
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Benefit
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The benefit forfeiture laws is that you won't have to put significant premium payments towards a policy only to find out that you get nothing in return. The premium payments of your policy ultimately end up being returned to you through the cash surrender value of the policy.
Consideration
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You should buy a fully underwritten policy if possible. If you cannot, and you are unsatisfied with the insurance policy terms and conditions, then consider buying an annuity policy instead of a life insurance policy. The annuity's account value is the death benefit so there is no actual inflated death benefit amount. However, surrender charges and penalties may be lower for annuities than for your graded-benefit insurance policy.
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