Montana State Life Insurance Practice Exam 2026 - Free Life Insurance Practice Questions and Study Guide

The cash surrender value is classified as a nonforfeiture benefit because it represents the accumulated value of a life insurance policy that can be received by the policyholder if they decide to terminate the policy before its maturity or before the insured event occurs. Nonforfeiture benefits are key features in life insurance products that ensure the policyholder receives some form of value from the policy rather than losing all investment if they choose to discontinue it.

In contrast, other benefits such as an accidental death benefit and a permanent disability benefit are contingent on specific events occurring (the death due to an accident and the occurrence of a permanent disability, respectively) and do not offer a cash value that can be accessed if the policy is surrendered. The waiver of premium benefit allows the policyholder to skip premium payments upon the occurrence of certain events, but does not provide immediate cash value or benefit if the policy is canceled.

Thus, the cash surrender value stands out as the only option that provides a tangible monetary benefit that the policyholder can claim when a policy is forfeited, hence categorizing it as a nonforfeiture benefit.