Which Nonforfeiture Option allows for continued cash value build-up?

Which Nonforfeiture Option allows for continued cash value build-up?

• A. Cash Surrender Value
• B. Extended Term
• C. Reduced Paid-Up
• D. Paid-Up Additions

Answer: (C)

The Reduced Paid-Up option is the correct choice because it allows the policyholder to stop paying premiums while keeping the policy in force. Under this option, the policy is converted into a paid-up policy for a reduced face amount; the cash value that has accrued is used to purchase a new policy with a lower death benefit, but the cash value continues to grow. This means that even though premium payments have ceased, the policyholder still benefits from the accumulation of cash value on the reduced coverage. In contrast, the Cash Surrender Value option results in the policy being terminated in exchange for the cash value, which stops any further cash value accumulation. The Extended Term option converts the existing policy into a term policy for the same face amount, but does not build cash value, as no payments are made towards the cash value. Paid-Up Additions are additional life insurance benefits bought with dividends from the insurance policy, but they do not pertain to the accumulation of cash value on the existing policy under this nonforfeiture context.

The Reduced Paid-Up option is the correct choice because it allows the policyholder to stop paying premiums while keeping the policy in force. Under this option, the policy is converted into a paid-up policy for a reduced face amount; the cash value that has accrued is used to purchase a new policy with a lower death benefit, but the cash value continues to grow. This means that even though premium payments have ceased, the policyholder still benefits from the accumulation of cash value on the reduced coverage.

In contrast, the Cash Surrender Value option results in the policy being terminated in exchange for the cash value, which stops any further cash value accumulation. The Extended Term option converts the existing policy into a term policy for the same face amount, but does not build cash value, as no payments are made towards the cash value. Paid-Up Additions are additional life insurance benefits bought with dividends from the insurance policy, but they do not pertain to the accumulation of cash value on the existing policy under this nonforfeiture context.