Question

What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value?

Select one:
a. Extended term
b. Cash surrender value
c. Reduced paid-up insurance
d. None

Answer 1

The nonforfeiture option that offers paid-up whole life insurance based on the current cash value is the reduced paid-up insurance option. It gives a lowered coverage without further premiums, calculated by the cash value's purchasing power.

Step-by-step explanation:

The nonforfeiture option that allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value is known as reduced paid-up insurance. This option provides the policyowner the ability to have a fully paid-up policy without any additional premiums, though the coverage amount is lower than the original policy.

The new policy's face amount is determined by the current cash value and how much that cash value can purchase as a single premium for whole life insurance at the insured's current age