Massachusetts Life Producer Practice Exam

What are the contractual rights allowing a deferred annuity owner to surrender cash value called?

1. Nonforfeiture options

2. Cancellation rights

3. Withdrawal privileges

4. Acceleration rights

The correct answer is: Nonforfeiture options

The contractual rights allowing a deferred annuity owner to surrender cash value are known as nonforfeiture options. This term refers specifically to the provisions in an insurance contract that protect the policyholder by ensuring they don't lose the value they've accumulated in the policy, even if they decide to terminate the contract. Such options can include the ability to receive the cash surrender value, opt for a reduced paid-up policy, or take a loan against the accumulated value. Understanding nonforfeiture options is crucial because they provide flexibility and assurance to the policyholder, allowing them to access funds in situations where they may no longer want to continue paying premiums or maintain the annuity. This aspect of annuity contracts is vital for long-term financial planning and security for the owner, highlighting their value as an investment product with certain guarantees.