Which statement about the extended term nonforfeiture option is correct?

The correct statement regarding the extended term nonforfeiture option is that it allows the policyowner to continue insurance coverage for some period with a reduced premium. This option comes into play when a policyholder decides to stop paying premiums on a whole life insurance policy or a universal life insurance policy. Instead of losing the insurance entirely, the policy can be converted into a term insurance policy for a specified period, utilizing the cash value accumulated in the policy.

This option effectively provides continued coverage without the immediate financial burden of paying premiums, although the coverage is limited to a timeframe based on the cash value. The policy's death benefit will be honored during this term, making it a valuable choice for those looking to maintain some level of insurance protection without ongoing payments.

The other choices do not accurately reflect the characteristics of the extended term nonforfeiture option. For instance, eliminating the need for premiums entirely would suggest no financial obligation, while this option still involves the use of existing cash value to fund the term. Likewise, guaranteeing higher death benefits does not apply, as the death benefit may actually be lower compared to the original whole life policy. Moreover, stating that the insurer cannot provide this option for any policies is incorrect, as many life insurance policies do include