Which statement about Extended Term is correct?

Which statement about Extended Term is correct?

• A. It uses the cash value to purchase a separate term policy.
• B. It extends the term by continuous premium payments.
• C. It provides a waiver of premiums during disability.
• D. It uses the cash value to purchase a single premium term policy with the same face amount.

Answer: (D)

Extended Term is a nonforfeiture option that uses the policy’s cash value to create term insurance for the same death benefit. The cash value is used to fund a single premium term policy, so you keep the same face amount but for a limited period determined by how much cash value is available. No ongoing premiums are paid after the conversion, and once the term ends, coverage may lapse or you can choose another option. That’s why the statement describing it as using the cash value to purchase a single premium term policy with the same face amount is the best fit.

Extended Term is a nonforfeiture option that uses the policy’s cash value to create term insurance for the same death benefit. The cash value is used to fund a single premium term policy, so you keep the same face amount but for a limited period determined by how much cash value is available. No ongoing premiums are paid after the conversion, and once the term ends, coverage may lapse or you can choose another option. That’s why the statement describing it as using the cash value to purchase a single premium term policy with the same face amount is the best fit.