Which nonforfeiture option uses cash value to purchase term insurance?

• A. Cash
• B. Extended term
• C. Reduced paid-up policy
• D. Policy loan

Answer: (B)

Nonforfeiture options let you use the policy’s accumulated cash value if you stop paying premiums. In the extended term option, that cash value is used to purchase a term policy with the same death benefit as the original policy. The term policy lasts for as long as the cash value can support it, providing continued life protection without future premium payments. This specifically converts cash value into term coverage rather than paying out cash or converting to a reduced or loaned arrangement.

By contrast, taking the cash surrender value would simply give you cash; a reduced paid-up policy uses the cash value to buy a paid-up policy with a smaller face amount, and a policy loan uses the cash value as collateral for a loan rather than purchasing term insurance.