What is a No Lapse Guarantee Rider?
A No Lapse Guarantee Rider is an optional add-on to a life insurance policy that guarantees the policy will not lapse, even if the cash value drops to zero or below the required level to cover the policy’s costs. This rider provides a safety net for policyholders, ensuring that the policy remains in force as long as they make the minimum premium payments outlined in the rider agreement. It is particularly common in Universal Life insurance policies, where fluctuating interest rates can affect cash value accumulation.
The No Lapse Guarantee Rider is beneficial because it eliminates the risk of losing coverage due to market downturns or unexpected changes in the policy’s cash value. For example, if a policyholder has a No Lapse Guarantee Rider, they can rest assured that the policy will not terminate, even if investment performance underperforms, as long as they meet the specified payment criteria.
However, the rider may require higher premiums or impose restrictions on premium payments to ensure the policy’s financial stability. It is a valuable feature for those who prioritize maintaining coverage over accumulating cash value, especially in uncertain economic conditions.