Nonforfeiture Option

An option that provides for reduced benefits if the insured’s policy lapses after it has been in force for a specified period of time. This option significantly increases long term care insurance premiums and only provides a benefit if the policy lapses. Note that many LTC insurance policies automatically include a “contingent nonforfeiture” clause, which provides that if the carrier receives approval for a “significant” rate increase, then the insured has the option of exercising the policy’s contingent nonforfeiture feature by stopping paying premiums. A rate increase is considered “significant” if it results in rates exceeding a specified percentage more than the original premium. This percentage varies depending on the age at which the policy was purchased.