Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

The cash surrender option is the correct choice because it allows the policyowner to receive the accumulated cash value of the life insurance policy. When a policyholder elects this option, the insurance company pays out the surrender value, which is the total cash value available to the policyholder, and thereafter has no further obligations or responsibilities towards the policyowner. This means that the coverage effectively ends when the policy is surrendered for cash.

In contrast, options such as extended term and reduced paid-up insurance provide the policyholder with alternative forms of coverage without using the cash value completely; thus, the insurance company retains some responsibilities. The loan option involves borrowing against the policy's cash value, which also keeps the policy active and the company involved, rather than releasing all obligations. Hence, cash surrender clearly distinguishes itself by concluding the contractual relationship between the company and the policyholder.