Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?

• A. Cash surrender value
• B. Reduced paid-up
• C. Interest only
• D. Extended term

Answer: (C)

When you stop paying premiums on a whole life policy, nonforfeiture options let you use the accumulated cash value instead of losing the policy. The standard nonforfeiture options are: taking the cash surrender value (you receive the cash value in your hands), converting the cash value to a reduced paid-up policy (you keep a smaller, fully paid policy in force), or converting to extended term insurance (the cash value buys term insurance for as long as possible with the same death benefit). An interest-only arrangement is not one of these options. It’s a settlement method used to distribute benefits, typically by paying only interest on the proceeds while preserving the principal, rather than transforming or preserving the policy’s value. So interest-only isn’t a nonforfeiture option.