What is a "non-forfeiture" clause in a life insurance policy?

A "non-forfeiture" clause in a life insurance policy is designed to protect the policyholder in the event that they are unable to continue making premium payments, leading to a lapse in the policy. This clause allows the insured to retain some benefits instead of losing everything they have paid into the policy.

For instance, if the policyholder stops paying premiums after a certain period, the non-forfeiture clause may allow them to receive a reduced paid-up insurance policy, which provides a lower death benefit than the original policy, or it may offer cash value that can be withdrawn. This feature ensures that the policyholder does not forfeit all the accumulated value of the policy due to circumstances that may make it difficult to maintain premium payments.

The other options do not accurately describe non-forfeiture clauses. While some policies can indeed be canceled without penalties, this does not pertain to the concept of non-forfeiture but rather to cancellation terms. Increasing premiums upon lapse is not a characteristic of non-forfeiture provisions, as these clauses focus on retaining benefits. Moreover, indefinite extension of coverage is not a standard aspect of non-forfeiture provisions; these provisions are about preserving some value from the policy, not extending coverage without payment.