Which statement correctly distinguishes the reduced paid-up option from the extended term option under M.G.L. c. 175, § 144?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under M.G.L. c. 175, § 144, the two insurance-continuing nonforfeiture options solve the same problem differently. Reduced paid-up uses the accumulated value to buy a fully paid-up policy with a lower death benefit that then needs no further premiums and endures for the rest of the insured's life. Extended term uses the value to keep the full original face amount in force, but only for a fixed period determined by the net level reserves. Choosing between them trades face amount against duration, and both stand beside the cash surrender option in the Massachusetts nonforfeiture trio.
Why the other options are wrong
- A) The description is exactly reversed: extended term keeps the full face for a limited time, while reduced paid-up lowers the face amount.
- C) The whole point of these options is to continue insurance without a cash payout; only the cash surrender option ends coverage with a payment.
- D) The nonforfeiture options under M.G.L. c. 175, § 144 attach to the policy's accumulated value; there is no two-year eligibility cutoff for reduced paid-up.
Memory hook
Paid-up shrinks the face but lasts a lifetime; extended term keeps the face but sets a timer.