Question

Which of the following is a Nonforfeiture Option that provides continuing cash value buildup?

a) Reduced paid-up insurance
b) Extended term insurance
c) Cash surrender
d) Paid-up additions

Answer 1

The correct Nonforfeiture Option that provides continuing cash value buildup is Reduced paid-up insurance. It allows the policyholder to convert their policy into a smaller, fully paid-up policy with a reduced death benefit. The cash value continues to grow in the new policy.

Step-by-step explanation:

The correct Nonforfeiture Option that provides continuing cash value buildup is Reduced paid-up insurance.

Reduced paid-up insurance allows the policyholder to stop paying premiums and convert their policy into a smaller, fully paid-up policy with a reduced death benefit. The cash value continues to grow in the new policy, providing ongoing protection and a potential source of funds in the future.

On the other hand, Extended term insurance is a Nonforfeiture Option where the cash value is used to purchase term insurance for the same face value as the original policy, but for a shorter period of time.

Cash surrender is another Nonforfeiture Option where the policyholder surrenders the policy in exchange for the cash value accumulated, but this terminates the policy and no longer provides ongoing cash value buildup.

Paid-up additions refer to using the cash value to purchase additional fully paid-up insurance with a larger death benefit.