Tennessee Insurance Practice Exam

Which of the following Nonforfeiture Options allows for continued cash value growth?

1. Cash Surrender Value

2. Extended Term Insurance

3. Reduced Paid-Up

4. Nonforfeiture Value

The correct answer is: Reduced Paid-Up

The option that allows for continued cash value growth is the Reduced Paid-Up option. When a policyholder chooses Reduced Paid-Up insurance, they are selecting to stop paying premiums but still keep their life insurance protection in force. This option converts the existing policy into a paid-up status with a reduced death benefit, while allowing the cash value accumulated to continue growing. In contrast, the Cash Surrender Value option involves the policyholder cashing out their policy, which means they no longer have insurance coverage and cease to benefit from any future cash value growth. The Extended Term Insurance option allows the policyholder to convert their accumulated cash value into a term insurance policy, which provides coverage for a specified period but does not build cash value. The Nonforfeiture Value is a broader term referring to the value of benefits that the policyholder is entitled to if they choose not to continue premium payments, but it does not specifically indicate continued growth in cash value as the Reduced Paid-Up option does.