Under M.G.L. c. 175, § 144, which set of options must a Massachusetts life policy offer when the policyholder stops paying premiums and chooses a nonforfeiture benefit?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.G.L. c. 175, § 144 is Massachusetts' nonforfeiture law, requiring life policies to make available the standard nonforfeiture options: taking the cash surrender value, applying the value as reduced paid-up insurance, or purchasing extended term insurance for the full face amount for a limited period. Massachusetts holds a special place in this area — it originated nonforfeiture regulation, and the statute ensures that accumulated policy value is never simply lost when premiums stop. Whichever option the policyowner elects, the value built into the contract must come back in one of these forms.
Why the other options are wrong
- B) Nonforfeiture is not limited to annuitization; the statute's standard trio under M.G.L. c. 175, § 144 is cash surrender, reduced paid-up, and extended term.
- C) A full refund of all premiums paid with interest is not one of the statutory options; the value paid out is the policy's nonforfeiture value, not a premium refund.
- D) There is no conversion into group coverage; the nonforfeiture options operate within the individual policy itself.
Memory hook
Cash, shrink, or stretch: surrender, paid-up, or extended term.