Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesEasy
A Florida resident is reviewing their non-forfeiture options for a lapsed whole life insurance policy. If the insured chooses to have the policy's cash value used to purchase a new policy of the same face amount as the lapsed policy, but for a shorter period of time, which non-forfeiture option have they selected?
- AExtended Term Option
- BCash Surrender Value
- CAutomatic Premium Loan
- DReduced Paid-Up Option
Show answer & explanationAnswer & explanation
Correct answer: A. Extended Term Option
The Extended Term Option uses the policy's cash value to purchase a single premium term policy for the same face amount as the original policy, but for a limited period.
Why the other options are wrong
- B. Cash Surrender Value involves taking the cash and terminating the policy.
- C. Automatic Premium Loan is a policy loan to pay an overdue premium, not a non-forfeiture option.
- D. Reduced Paid-Up Option purchases a new, smaller face amount policy that is paid up for life.
Extended Term Option
A non-forfeiture option where the cash value of a lapsed whole life policy is used to purchase a single premium term policy for the same face amount as the original policy, for a limited term.
- Same face amount
- New policy is term insurance
- Duration is limited
- Automatic if no other option chosen
Memory trick: Don't Forfeit Your Future: Cash, Reduce, or Extend!