Which non-forfeiture option allows a policyholder to maintain some level of coverage despite not paying premiums?

The choice of Extended Term Insurance as the correct answer highlights an important aspect of non-forfeiture options in life insurance policies. When a policyholder stops paying premiums, rather than losing their coverage entirely, Extended Term Insurance allows them to convert their existing policy into a term policy for a specified period. This option provides a level of continued coverage without the need for further premium payments, enabling the policyholder to maintain a death benefit even when they are unable to pay premiums.

Under this provision, the cash value accumulated in the policy is used to purchase a term policy with the same face amount as the original permanent policy. The terms of the extended coverage are based on the policyholder’s age and the value accumulated at the time premiums stopped. This ensures that the policyholder still has some level of financial protection for their beneficiaries during the term.

The other options, such as Cash Surrender Value, typically involve surrendering the policy for its cash worth, which means no coverage remains. Reduced Paid Up Insurance allows for a smaller policy to be maintained without additional premiums but does not provide the same level of term coverage advantages as Extended Term Insurance. An Automatic Premium Loan utilizes the cash value to pay the premium, keeping the original insurance active but not offering a new term option