Which type of life insurance policy is subject to standard nonforfeiture law?

Whole life policies are subject to standard nonforfeiture laws because these laws protect the policyholder's rights in the event that they stop paying premiums. Nonforfeiture laws ensure that the policyholder has options available to them, such as receiving the accumulated cash value or utilizing it to purchase a reduced paid-up insurance policy if they can no longer afford premiums.

Whole life insurance creates a cash value over time, which is an integral part of the policy. If a policyholder were to lapse their policy, the nonforfeiture law would require that they receive the cash value or some form of benefit from the policy instead of losing everything. This regulatory protection is designed to enhance consumer confidence in long-term insurance products like whole life.

Other types of policies, such as term life, do not involve a cash value component; they provide pure life insurance coverage for a specified period with no savings element. As a result, they are not subject to the same nonforfeiture requirements since there are no accumulated values to forfeit. Universal and variable life policies also have cash value components, but their structures and benefits might be governed by different regulations that are not as straightforward as the provisions in whole life policies.