Which description characterizes a reduced paid-up nonforfeiture option?

• A. Policy has a decreased face amount
• B. Cash value is converted to a paid-up policy with reduced face amount
• C. Policy is surrendered for cash value
• D. The policy is terminated and all benefits cease

Answer: (A)

The idea behind a reduced paid-up nonforfeiture option is that the policy’s cash value is used to buy a new, fully paid-up policy with a smaller death benefit. Because it’s paid up, no further premiums are due, and the policy stays in force for life, but with a reduced face amount.

That makes this option distinct from simply surrendering for cash or terminating the policy. It’s not just “the face amount goes down” on its own—the key is that the policy becomes a paid-up policy using the cash value, with no further premiums required.