A whole life policy option where extended term insurance is selected is called a(n)

• A. extended term option
• B. cash surrender option
• C. nonforfeiture option
• D. reduced paid-up option

Answer: (C)

Nonforfeiture options are built into cash-value life policies to protect you if you stop paying premiums. One of these options uses the policy’s cash value to buy term insurance for the same face amount. In other words, the extended term arrangement converts the cash value into a temporary term policy that lasts as long as the funds allow, preserving the death benefit for as long as that term lasts.

That’s why the best answer is that this feature is a nonforfeiture option. The other choices describe specific forms that can occur under nonforfeiture (taking cash value, or converting to a paid-up policy with a reduced face amount), but they aren’t the umbrella term for the concept described.