Question

When life ins. policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term ins. that has a face value of:

Answer 1

The cash value from the cancelled life insurance policy is used to purchase a term insurance policy with a face value equal to the original policy's death benefit, ensuring continued coverage for a specific term.

Step-by-step explanation:

When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value accumulated in the policy will be used to purchase a term insurance policy. This new policy will provide coverage for a specified term and will have a face value equal to the original policy's death benefit.

Essentially, the cash value acts as a single premium payment for the new term life policy, ensuring that the policyholder continues to have life insurance coverage for a certain period without requiring additional premium payments.