L&HNew Yorkmedium
Under NY Insurance Law § 4221, the Standard Nonforfeiture Law for life insurance requires that ordinary life policies provide which of the following to a policyholder who stops paying premiums?
AImmediate refund of all premiums paid, less administrative fees
BAutomatic conversion to term insurance for the remaining face amount
CContinued death benefit coverage indefinitely at no further cost
A cash surrender value and paid-up insurance options after the policy has been in force for a minimum period
Why this is the answer
NY's Standard Nonforfeiture Law for life insurance (§ 4221) requires that permanent life policies offer the policyholder, after the policy has been in force for a minimum period (typically 3 years), three nonforfeiture options: (1) net cash surrender value, (2) reduced paid-up insurance, and (3) extended term insurance. There is no statutory premium refund, no automatic term conversion of remaining face, and no free continued coverage. The SNFL exists so policyholders who can no longer pay are not stripped of accumulated cash value.
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