Question

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

APay back all premiums owed plus interest.
BReceive payments for a fixed amount.
CPurchase a single premium policy for a reduced face amount.
DPurchase a term rider to attach to the policy.
Correct! When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.

Answer 1

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to purchase a completely paid up permanent policy with a reduced face amount.

Step-by-step explanation:

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy. This means that the cash value of the old policy can be used as a single premium to buy a new policy with a lower coverage amount.