A policyowner surrenders a whole life policy and elects to receive the accumulated cash value in a lump sum. This is an example of exercising which type of option?
Explanation
Nonforfeiture options govern what a policyowner may do with the guaranteed cash value if the policy is surrendered or lapses; the three standard choices are cash surrender, reduced paid-up insurance, and extended term insurance. Dividend options apply to how dividends from a participating policy are used. Settlement options determine how the death benefit (or surrender proceeds) is paid out over time to a payee. A policy loan borrows against cash value without surrendering the policy, so coverage continues; here the owner is giving up the policy for cash.
This 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 husband and wife die in the same car accident, the husband insured under a $500,000 life policy with the wife as primary beneficiary and their adult son as contingent beneficiary. The policy contains a standard 'Common Disaster' clause (130-day survival period). The wife dies first by 2 hours; the son survives. Where does the death benefit go?
- The incontestability provision in a life insurance policy provides that after the policy has been in force for a stated period (typically two years), the insurer:
- The grace period provision in a life insurance policy means that if a premium is not paid on its due date:
- A rider that keeps a life insurance policy in force by paying the premiums for the policyowner if the insured becomes totally disabled is called the:
- The 'entire contract' provision in a life insurance policy states that the complete agreement between the parties consists of:
- To reinstate a lapsed life insurance policy under the reinstatement provision, the policyowner generally must:
Last reviewed: · editorial process