Reduced paid-up nonforfeiture option uses cash values to purchase a paid-up permanent policy with a smaller face amount but no further premiums.

• A. Increases face amount
• B. Pays additional premiums
• C. Extends term
• D. Uses cash values to purchase paid-up permanent policy with smaller face amount

Answer: (D)

Nonforfeiture options protect you when you’ve built cash value in a policy. The reduced paid-up option uses that cash value to buy a new permanent policy that is fully paid up for life but has a smaller face amount. Once this new paid-up policy is in place, no further premiums are due, and the policy stays in force for the insured’s lifetime. The death benefit is the new, smaller face amount, not the original amount. This option neither increases the face amount, nor requires additional premiums, nor extends a term policy.