In life insurance, which option is not a valid nonforfeiture option?

In life insurance, which option is not a valid nonforfeiture option?

• A. Accumulation at interest
• B. Cash surrender value
• C. Reduced paid-up insurance
• D. Extended term

Answer: (A)

Nonforfeiture options are ways to use a policy’s cash value to keep some protection if premiums aren’t continued. The valid paths after a lapse are to take the cash surrender value (receive the cash value now), to use the cash value to buy paid-up insurance (a reduced death benefit with no further premiums), or to convert the cash value into extended term insurance (term coverage for as long as the cash value can support it). Accumulation at interest, however, isn’t a nonforfeiture option. It describes a way dividends or cash value can be left to accumulate interest or be held for later, rather than a mechanism to preserve or convert coverage after lapse. So it isn’t one of the options available to maintain life insurance protection when a policy lapses.

Nonforfeiture options are ways to use a policy’s cash value to keep some protection if premiums aren’t continued. The valid paths after a lapse are to take the cash surrender value (receive the cash value now), to use the cash value to buy paid-up insurance (a reduced death benefit with no further premiums), or to convert the cash value into extended term insurance (term coverage for as long as the cash value can support it). Accumulation at interest, however, isn’t a nonforfeiture option. It describes a way dividends or cash value can be left to accumulate interest or be held for later, rather than a mechanism to preserve or convert coverage after lapse. So it isn’t one of the options available to maintain life insurance protection when a policy lapses.