Life Policy ProvisionsQuestion 162 of 716
Which nonforfeiture option uses the cash value of a lapsed permanent policy to keep the same face amount in force as term insurance for as long as the cash value will last?
a.Extended term insurance
b.Cash surrender
c.Automatic premium loan
d.Reduced paid-up insurance
Explanation
Extended term insurance uses the existing cash value as a single premium to purchase term insurance equal to the original face amount, lasting as long as the cash value will buy coverage. In most permanent policies this is the automatic (default) nonforfeiture option.
Law Reference: Cal. Ins. Code §10209This topic, taught in full in the California Life & Health Insurance Producer Exam guide. California Life & Health Insurance Producer Exam — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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Related questions on this topic
- Under which settlement option does the insurer retain the death benefit and pay only the earnings on it to the beneficiary at regular intervals?
- A beneficiary wants guaranteed equal payments for the next 20 years, even if she dies before that period ends, with any remaining payments going to her estate. Which settlement option meets this need?
- Which life-income settlement option provides the largest periodic payment to a single beneficiary, but stops entirely at that beneficiary's death with no refund?
- An owner of a lapsed whole life policy elects the reduced paid-up nonforfeiture option. What is the result?
- Policy dividends paid on participating life insurance policies are generally treated for federal income-tax purposes as which of the following?
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)