When a policyowner uses the cash value of a whole life policy, which nonforfeiture option allows them to convert this into a term insurance policy with an equal death benefit?

The correct answer is that the extended term insurance nonforfeiture option allows a policyowner to convert the cash value of a whole life policy into a term insurance policy that provides an equal death benefit to the original whole life policy.

When a policyholder decides to utilize this option, the insurance company calculates the amount of term insurance that can be purchased with the existing cash value while maintaining the same face amount as the original policy. This means that if the whole life policy has accumulated cash value, the policyholder can use that amount to continue enjoying life insurance coverage even if they can't or choose not to make premium payments. As a result, the extended term insurance allows the individual to have a level of protection without lapsing coverage due to non-payment.

This option is particularly significant for policyholders who may not need whole life insurance in the long run or who might be facing financial difficulties yet still wish to keep a death benefit for their beneficiaries. The term insurance sourced through the extended term option is temporary and typically lasts for a specific period, depending upon the amount of cash value.

In contrast, the reduced paid-up insurance option allows the policyholder to use the cash value to purchase a whole life policy with a reduced death benefit, which differs from the goal of