State RegulationsFL specificDifficulty 3/5
Which statement correctly distinguishes nonforfeiture options from settlement options in a Florida life policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Chapter 627, Florida Statutes, nonforfeiture options (cash surrender, reduced paid-up, extended term) exist to protect the living policyowner's cash-value equity when premium payments stop. Settlement options (lump sum, interest only, fixed amount, fixed period, life income) shape how the insurer distributes the death proceeds after the insured dies. Keeping the trigger straight - premium default versus death claim - is the key to answering these questions.
Why the other options are wrong
- B) This reverses the triggers: nonforfeiture arises on premium default, and settlement options apply at death.
- C) The policyowner generally elects the settlement option (or leaves the choice to the beneficiary), never the claims department.
- D) Settlement options distribute death proceeds, not cash value, so the two sets of options are not interchangeable.
Memory hook
Stop paying = nonforfeiture; die = settlement.