What happens to the cash value if a policy is forfeited?

When a life insurance policy is forfeited, the cash value generally belongs to the policyholder unless there are specific contractual stipulations that state otherwise. In the context of many life insurance policies, when a policy is surrendered or lapsed, the insurer typically will return the cash value to the insured. This amount reflects the savings component of the policy that has accumulated over time, which the policyholder contributed to through premiums.

The cash value acts as a form of savings or investment, and as a result, returning it ensures that the insured receives benefits equivalent to what they paid into the policy, minus any applicable fees or loans taken against that value. Understanding this aspect of policy forfeiture is essential for anyone studying life insurance, as it reinforces the importance of the cash value feature and how it serves policyholders even in the event of policy termination.