Pennsylvania Life and Health Insurance Exam Practice Question
A condition in a cash value life insurance policy that allows a policyowner to terminate the policy in return for a reduced paid-up policy of the same type is referred to as:
Correct Answer: D
Rationale: A nonforfeiture provision allows policyowners to terminate their cash value life insurance policy and receive a reduced paid-up policy, ensuring they do not lose their accumulated benefits.
Option A, loan provision, refers to borrowing against the policy's cash value, not terminating it. Option B, automatic premium loan, involves using the cash value to cover unpaid premiums, but it does not provide a reduced paid-up policy. Option C, extended term option, allows for converting the cash value into term insurance, but it does not focus on a reduced paid-up policy. Thus, the nonforfeiture provision is the only option that directly addresses the termination for a reduced benefit.
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