Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under the extended term nonforfeiture option, the net cash value of a lapsed whole life policy is used to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The extended term option uses the net cash value as a single premium to buy term insurance in the amount of the original face value, keeping the full death benefit in force for a limited period - the period the cash value will support. This differs from the reduced paid-up option, which buys a smaller permanent policy, and from the cash option, which pays the surrender value out. The three nonforfeiture options are covered in objective LIFE-II.E.8.
Why the other options are wrong
- B) Buying a reduced amount of permanent coverage is the reduced paid-up option, not extended term.
- C) Paying the cash value out is the cash surrender option; extended term keeps coverage in force.
- D) The extended term option is life insurance, not an annuity, and benefits no beneficiary in cash form.
Memory hook
Extended term: full face, temporary. Reduced paid-up: smaller face, permanent. Cash: pocket it.