All of the following are Nonforfeiture Options EXCEPT: A. Reduced Paid-Up Option B. Extended Term Option C. Cash Surrender Option D. Automatic Premium Loan Option

Understand the Problem

The question is asking to identify which item from the listed options is NOT a nonforfeiture option. Nonforfeiture options provide a way for policyholders to recover the cash value of a life insurance policy if they can no longer pay the premiums. The options listed are: Reduced Paid-Up Option, Extended Term Option, Cash Surrender Option, and Automatic Premium Loan Option.

More Information

Nonforfeiture options are the choices available to a life insurance policyholder if they discontinue premium payments on a policy with a cash value. The common nonforfeiture options include:

• Cash Surrender Option: The policyholder receives the policy's cash value.
• Extended Term Option: The policyholder uses the cash value to purchase a term life insurance policy for a specified period.
• Reduced Paid-Up Option: The policyholder uses the cash value to purchase a paid-up policy with a reduced death benefit.

The Automatic Premium Loan Option is a feature that allows the insurer to automatically borrow from the policy's cash value to pay any due premium. This is to prevent the policy from lapsing due to non-payment.

Tips

A common mistake is confusing the Automatic Premium Loan option with nonforfeiture options. Nonforfeiture options are what you can do with the cash value of your life insurance policy if you stop paying premiums, while an automatic premium loan is a way to keep the policy in force by borrowing from the cash value to pay the premiums.

Sources

• What Are Life Insurance Nonforfeiture Options? - westernsouthern.com
• Solved All of the following are nonforfeiture options found | Chegg.com - chegg.com
• What Is a Nonforfeiture Clause? 4 Payout Options Explained - investopedia.com