Connecticut Life Producer Practice exam

What are the three nonforfeiture options in life insurance policies?

1. Cash surrender value, reduced paid-up insurance, or term insurance option

2. Cash surrender value, reduced paid-up insurance, or extended term option

3. Full surrender value, paid-up insurance, or extended premium payment

4. Reduced premium payment, cash value withdrawal, or extended term option

The correct answer is: Cash surrender value, reduced paid-up insurance, or extended term option

The correct answer is identified as cash surrender value, reduced paid-up insurance, or extended term option, which are indeed the three recognized nonforfeiture options in life insurance policies. Nonforfeiture options are designed to provide policyholders with benefits if they decide to stop paying premiums and surrender their policy. The cash surrender value allows policyholders to receive a cash payout that reflects the accumulated value of their policy at the time of surrender. This option is beneficial for those who may need immediate funds instead of continuing coverage. Reduced paid-up insurance allows the policyholder to convert their existing policy into a paid-up status for a lower amount of coverage. This means that the insured has chosen to use the cash value to purchase a new policy that requires no further premium payments but still provides some level of death benefit. The extended term option allows policyholders to convert their cash value into term insurance for a certain period. This means that instead of surrendering the policy and losing coverage, the policyholder can continue to have life insurance coverage for a specified time using the existing policy value without additional payments. These options differentiate themselves from those found in other selections that may not accurately reflect the established nonforfeiture options recognized in life insurance practices.