Which of the following is NOT a nonforfeiture option?

• A. Reduction of Premium
• B. Cash Surrender Value
• C. Reduced Paid-Up Insurance
• D. Extended Term Insurance

Answer: (A)

The concept being tested is what counts as a nonforfeiture option. When a policy lapses because premiums aren’t paid, the policy’s cash value can be used to keep some coverage alive through defined nonforfeiture options. The built-in choices are cash value offered as a lump sum (cash surrender value), a smaller fully paid-up policy (reduced paid-up insurance), or a term policy for the same death benefit using the cash value (extended term insurance). These options allow the policyholder to retain some value or protection instead of losing everything.

Reduction of premium is not one of these built-in nonforfeiture options. It’s not a standard way to preserve the policy’s value under the nonforfeiture framework. The other three choices—cash surrender value, reduced paid-up insurance, and extended term insurance—directly involve using the policy’s cash value to continue some form of coverage.