Question 13

Extended term insurance can be selected under the nonforfeiture provision of a whole life policy.

Extended term insurance allows policyholders to convert their whole life insurance policy into a term insurance policy without losing value. This option is provided under the nonforfeiture provisions, which protect the policyholder's rights even if they stop paying premiums.

A) interest-only

The interest-only option refers to a settlement option where the insurer retains the principal amount while paying the policyholder interest. This option does not relate to the selection of extended term insurance and is not a provision found in whole life policies.

B) nonforfeiture

Nonforfeiture provisions allow policyholders to receive benefits from their whole life policy even if they stop paying premiums. One of these benefits includes the option to convert to extended term insurance, making this the correct choice.

C) cash value

The cash value option allows policyholders to access the savings component of their whole life policy. While this is a significant feature of whole life insurance, it does not pertain to the selection of extended term insurance, which is specifically covered under nonforfeiture provisions.

D) settlement

Settlement options dictate how the death benefit is paid out to beneficiaries, such as lump sum or installments. These options do not involve the conversion of a whole life policy into a term policy, thus making this choice incorrect in reference to extending term insurance selection.

Conclusion

The nonforfeiture provision is essential because it enables policyholders to maintain insurance coverage in the form of extended term insurance even after premium payments cease. Other options, such as interest-only, cash value, and settlement, do not provide this capability and therefore cannot be considered correct in this context.