What are nonforfeiture options?

• A. Cash surrender value
• B. Reduced paid-up insurance
• C. Extended term
• D. All of the above.

Answer: (D)

Nonforfeiture options are the ways a permanent life policy can keep some value visible to the owner when premiums stop and the policy would otherwise lapse. They exist because the policy has accumulated cash value, and instead of losing it entirely, you can choose one of several paths.

First, cash surrender value lets you surrender the policy and receive the available cash value (usually after surrender charges). This ends the policy coverage but gives you immediate cash.

Second, reduced paid-up insurance uses the policy’s cash value to buy a smaller amount of paid-up life insurance. No future premiums are due, and the coverage continues for as long as that paid-up policy remains in force.

Third, extended term uses the cash value as a single premium to purchase term insurance with the same death benefit as the original policy for as long as possible. The term eventually ends, but you maintain the death benefit for a time without further premiums.

All of these are valid nonforfeiture options, so the correct understanding is that each one preserves some value or coverage rather than forfeiting everything if the policy lapses.