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What is an Anti-Forfeiture Clause and Why It Matters
Definition & Meaning
An anti-forfeiture clause is a provision found in life insurance policies. It allows policyholders who stop paying their premiums to access the cash value of their policy, obtain extended term insurance, or receive reduced paid-up insurance. These options are provided in accordance with specific tables outlined in the policy. The purpose of this clause is to protect policyholders from losing their benefits due to non-payment of premiums, a requirement often mandated by law.
Table of content
Legal Use & context
Anti-forfeiture clauses are primarily used in the context of insurance law. They are relevant in civil law, particularly in cases involving life insurance. These clauses help ensure that policyholders do not lose their benefits unfairly. Users can manage their insurance policies and understand their rights by utilizing legal templates from US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A policyholder has a life insurance policy with a cash value of $10,000. After missing several premium payments, they invoke the anti-forfeiture clause and choose to receive the cash value instead of losing the policy.
Example 2: A policyholder stops paying premiums on their life insurance but can convert their policy into reduced paid-up insurance, allowing them to maintain some level of coverage (hypothetical example).
State-by-state differences
State
Anti-Forfeiture Clause Variations
California
Requires clear disclosure of the clause in insurance policies.
New York
Mandates specific terms for cash value access.
Texas
Allows policyholders to choose between cash value or reduced paid-up insurance.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Forfeiture Clause
A provision that allows a company to terminate a policy if premiums are unpaid.
Anti-forfeiture clauses protect against losing benefits, while forfeiture clauses allow for termination.
Cash Value Insurance
A type of life insurance that accumulates cash value over time.
Anti-forfeiture clauses apply to cash value policies, ensuring access to that value upon non-payment.
Common misunderstandings
What to do if this term applies to you
If you find yourself unable to pay your life insurance premiums, review your policy for the anti-forfeiture clause. You may have options to access cash value or convert your policy. Consider using US Legal Forms to find templates that can help you manage your insurance situation. If you are unsure about your rights or options, consulting a legal professional may be necessary.
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