Which nonforfeiture option provides cash to the policyowner upon surrender?

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

Answer: (D)

The concept here is nonforfeiture options, which are built into life insurance to protect the policyholder if premium payments stop. Among these options, the one that provides cash to the policyowner when surrendering the policy is the cash surrender option. When a policy is surrendered, the insurer pays the cash surrender value—essentially the accumulated cash value minus any surrender charges—and the policy ends. This is different from the other nonforfeiture options, which apply the cash value to alter how the coverage continues rather than producing an immediate cash payout: extended term uses the cash value to convert to a term policy for a limited time; reduced paid-up uses it to buy a smaller paid-up policy; paid-up additions use it to purchase extra paid-up insurance. So the cash surrender option is the one that delivers cash at surrender.