Which of these is NOT considered to be a common life insurance nonforfeiture option?

• A. Life income annuity
• B. Cash surrender value
• C. Reduced paid-up insurance
• D. Extended term insurance

Answer: (A)

Nonforfeiture options are built-in choices a policyowner can take when a policy lapses due to nonpayment, using the policy’s cash value to preserve some value of the policy. The common options are: taking the cash surrender value as a lump sum, using the cash value to purchase extended term insurance, or using it to buy reduced paid-up insurance. These choices directly preserve or convert the policy’s value into a new form of coverage.

A life income annuity, on the other hand, is a type of settlement option that pays income, often chosen at surrender or death, rather than a nonforfeiture method that preserves the policy’s value. It’s not among the standard nonforfeiture options, which is why it’s not considered a common nonforfeiture option.