Under an extended term nonforfeiture option, the policy cash value is converted to what?

In an extended term nonforfeiture option, the cash value of the life insurance policy is converted into a new term insurance policy that provides a death benefit equal to the full face amount of the original whole life policy. This allows the policyholder to maintain the same coverage level for a specified period, even after they stop making premium payments.

This option is particularly beneficial for individuals who may face financial difficulties but still want to ensure their beneficiaries receive the full intended benefit. By converting the accumulated cash value into a term policy with the same face amount, the policyholder effectively extends the coverage without any reduction in the death benefit, providing peace of mind during a challenging time.

The other choices do not accurately represent the nature of the extended term option. A reduced face amount would imply a decreased coverage, which is not the case with this specific nonforfeiture option. A temporary term policy does not clarify the face amount maintained, while an annual renewable term policy entails features and costs that differ from the intended terms of the extended coverage. Thus, the focus remains on preserving the full death benefit for a temporary period following the policyholder's lapse in premium payments.