83. Which nonforfeiture option uses cash surrender values to select paid-up term insurance for the full face amount of the policy?
Answer: B
Extended term insurance uses cash surrender values to select paid-up term insurance for the full face amount of the policy.
Extended term insurance is a nonforfeiture option that allows policyholders to use the cash surrender value of their lapsed life insurance policy to purchase term insurance with the same face amount for a specified period.
A) Reduced term insurance.
Reduced term insurance is not a recognized nonforfeiture option and does not specifically use cash surrender values to purchase term insurance. Instead, it typically refers to a situation where the benefit amount is decreased, which does not align with the question's criteria for using cash values to maintain a full face amount.
B) Extended term insurance.
Extended term insurance is the correct answer as it specifically utilizes the cash surrender value of a policy to buy term insurance for the full face amount for a limited time. This option ensures that the policyholder maintains coverage without needing to pay premiums, as the cash value is converted to provide a new term policy.
C) Reduced paid-up insurance.
Reduced paid-up insurance is another nonforfeiture option, but it allows the policyholder to use the cash surrender value to purchase a smaller amount of whole life insurance, not term insurance. This option does not fulfill the requirement of maintaining the full face amount of the original policy.
D) Extended paid-up insurance.
Extended paid-up insurance allows the policyholder to use the cash surrender value to maintain a whole life policy with reduced coverage, but it does not involve term insurance. Therefore, it does not meet the requirement stated in the question regarding term insurance coverage.
Conclusion
Extended term insurance is clearly the correct choice, as it directly addresses the question of utilizing cash surrender values to secure term insurance for the full face amount of the original policy. Other options do not offer this specific benefit, focusing instead on reduced coverage or different types of insurance, thus failing to meet the criteria outlined in the question.