Which nonforfeiture option uses the policy's cash value to convert to a term insurance with the same face amount?

• A. Cash surrender value
• B. Reduced paid-up
• C. Extended Term
• D. Paid-up additions

Answer: (C)

This question focuses on nonforfeiture options and how the policy’s cash value is used to maintain coverage when premiums aren’t paid. Extended Term is the option that uses the cash value as a single premium to convert the policy into term insurance with the same face amount. The death benefit stays equal to the original face amount, but the coverage is provided for a limited term—the length of that term depends on how much cash value is available to fund the term premium. If that term ends and no further premium is paid, the coverage ends.

Understanding the others helps see why this one fits: taking the cash value as a lump sum stops the policy from existing; reduced paid-up uses the cash value to buy a smaller, fully paid-up policy with a reduced face amount; paid-up additions use the cash value to buy additional paid-up life coverage, increasing the death benefit over time.