Final answer:
Cash value life insurance contracts include nonforfeiture options, which is true. These options secure a benefit for policyholders even if they can't pay premiums, by utilizing the accumulated cash value. Nonforfeiture options like cash surrender value and reduced paid-up insurance provide financial security and flexibility for policyholders.
Step-by-step explanation:
The answer to the student's question is true. Cash value life insurance contracts indeed include nonforfeiture options. These options ensure that a policyholder will receive a benefit even if they are unable to continue paying premiums.
In a cash value life insurance policy, which can also be referred to as whole life insurance, a portion of the premiums paid builds up as cash value. This accumulated amount can grow over time and serves as an account for the policyholder's use. Policyholders may borrow against the cash value, use it to pay premiums, or even surrender the policy for the cash value if they no longer need the coverage.
Nonforfeiture options are critical because they provide policyholders with the financial security that their investment will not be entirely lost if they decide to discontinue their life insurance policy. These options can come in various forms, such as the cash surrender value, reduced paid-up insurance, or extended term insurance.