Life Policy ProvisionsQuestion 163 of 716
An owner of a lapsed whole life policy elects the reduced paid-up nonforfeiture option. What is the result?
a.An immediate lump-sum cash payment of the full accumulated cash value, ending all coverage
b.The original full face amount continues for the insured's whole life, with no further premiums due
c.A smaller permanent policy with no future premiums, payable at death or earlier surrender
d.Term coverage equal to the original face amount continues until the cash value is exhausted, then lapses
Explanation
Reduced paid-up uses the cash value as a single premium to purchase a smaller fully paid-up permanent policy. No further premiums are due, coverage lasts for life, and the new face amount is less than the original.
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 →
Practice all 716 questions free — no signup required.
Own the complete California Life & Health Insurance Producer Exam guide — PDF + EPUB, $19.99 →
Related questions on this topic
- 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?
- 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?
- Policy dividends paid on participating life insurance policies are generally treated for federal income-tax purposes as which of the following?
- Which dividend option uses the dividend to purchase a small amount of additional permanent life insurance with its own cash value, increasing both the death benefit and the cash value?
- An insured names her spouse as primary beneficiary on an irrevocable basis. Several years later she wants to change the beneficiary. What must she do?
Last reviewed: · editorial process
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)